Friday, September 26, 2008

As you sow, so shall you reap

In 1999, NY Times reported on " Fannie Mae Eases Credit To Aid Mortgage Lending ". Following are extracts from the same, which clearly point out the root causes of the cheap mortgage-funded buying of houses way back in 1999 which exploded in early 2007 in the form of a subprime crisis and housing mess.

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

And here is the icing on the cake :
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

It clearly shows that the mortgage crisis we've inherited today is because of

1. Clinton administration. Yet we blame George Bush, Ben Bernanke, Paulson and the CEOs of investment banks appointed after 2000.

2. "Phenomenal Growth in profits" turned into spiraling losses in the form of write-downs, billions of dollars, sacking of employees world-wide, the list is endless.

Towards the end, NYtimes also mentions the obvious....

The government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

To end, all I can say is that in the greed for profits and votes, no one heeded this one last warning!!

Keep the comments rolling in.....


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  1. A Paradox. The people who criticize today were once part of this mess.

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