Just in case anyone out there still thinks the powers-that-be didn’t see this coming, here’s a New York Times from 1999:
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.
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.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates—anywhere from three to four percentage points higher than conventional loans.
‘’Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements,’’ said Franklin D. Raines, Fannie Mae’s chairman and chief executive officer. ‘’Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.’’
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But 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.
Shockingly prescient, no? So if the New York Times could see this coming, why couldn’t Democrats in Congress? And I do mean Democrats, because Republicans have been trying to fix this for years now.
In 2007:
WASHINGTON (MarketWatch)—President Bush said Thursday that he’s against letting Fannie Mae and Freddie Mac buy more home loans in an effort to prop up the sagging mortgage market, commenting that he prefers to reform the two entities first.
The Bush administration has been pushing for legislation to reduce the massive mortgage portfolios of Fannie Mae and its smaller government-sponsored sibling, Freddie Mac.
WASHINGTON, Feb. 17 - The Federal Reserve chairman, Alan Greenspan, urged Congress on Thursday to sharply scale back Fannie Mae and Freddie Mac, the giant and troubled government-sponsored mortgage companies. . . .
Mr. Greenspan’s comments came as Congress and the Bush administration attempt sweeping changes in how Fannie Mae and Freddie Mac are regulated.
In 2004, right after Bush’s re-election:
One group that declined conspicuously was thrift and mortgage- company stocks. [Bush] is expected to crack down on the quasi- governmental mortgage lenders Fannie Mae and Freddie Mac, which have been criticized for accounting irregularities and princely executive salaries. Fannie Mae fell $2.67 to $68.77, and Freddie Mac slid $1.25 to $65.99.
In September 2003, U.S. Treasury Secretary John Snow urged Congress to get tough with Fannie Mae, the giant mortgage company run by Franklin D. Raines. Snow said lawmakers needed to create a strong federal regulator to scrutinize Fannie Mae, which controls almost $1 trillion of U.S. home mortgages.
In 2002:
NEW YORK (CNN/Money) - Mortgage financers Fannie Mae and Freddie Mac have agreed to voluntarily meet certain corporate disclosure requirements, prompting the Bush administration to back off its efforts to eliminate their exemption from the rules. . . .
The announcement comes days before the Bush administration was due to make an announcement on the two companies’ role in the mortgage finance system, and it adds to a series of steps the companies have taken to address concerns about their special status in U.S. financial markets.
With Vermont Sen. James Jeffords expected to announce Thursday that he is leaving the Republican Party, George Bush’s legislative agenda has suffered a major blow. And it’s forcing investors who had hoped the president would have his way in Congress to do some serious rethinking.
Jeffords’ breaking ranks with the GOP would end the 50-50 split in the Senate, giving operational control to the Democrats. . . .
There are some stocks, however, that likely would benefit from the Senate switch. Wallace notes that, with a greener Senate, companies focusing on alternative energy sources may see their recent run continue. And more specifically, mortgage finance giants Fannie Mae (FNM:NYSE - news - boards) and Freddie Mac (FRE:NYSE - news - boards) have brighter outlooks.
Currently, the Senate Banking Committee is headed by Texas Sen. Phil Gramm, who has been mulling tougher legislation of Fannie and Freddie. Maryland Sen. Paul Sarbanes, who would take over the Banking Committee, is much softer on the two.
Get the point?
Throughout the Bush administration Republicans have tried to reform Fannie Mae and Freddie Mac and all along were stymied by Democrats because the GOP never had a filibuster-proof majority.
Which isn’t to say that Republican hands are entirely clean on this. But let’s just say that one group of politicians in Washington DC was trying to fix this before it blew up in our faces, while the other group was too busy building a financial house of cards for the purposes of buying votes.