The beginning of the current financial crisis!! This from a New York Times article dated September 30, 1999, by Steven A. Holmes:
“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.
“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.
Fannie Mae, the nation’s biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks (pressure banks?) to make more loans to people with less-than-stellar credit ratings.
And some tried to warn of the dangers of this plan, but wouldn’t you know, nobody listened.
”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out…..”
The same thing is happening now with these massive bailouts. Nobody is listening to reason, and some day down the line, we will look back and say this is where we went wrong, throwing good money after bad, and borrowing money to do it!
Well, I take that back, some people are speaking with wisdom and reason, but they will be drowned out by the same people who got us into the mess to begin.