How did our nation get into this current financial mess? I cannot imagine how much $700 billion dollars really is! And, now it looks like I will be part of the crowd that has to PAY that much to straighten out this mess! Could this have been avoided?
I often use the Snopes website to check for the authenticity of forwarded emails that I may receive (almost all of which are either totally wrong or at least inaccurate). The site is reputable and I have not found it to be wrong about anything yet. But I have noticed what I perceive as a slight bias toward the democratic presidential nominee when the site is reporting on issues concerning the current election. That is why I found it significant that they published an article yesterday about the origin of the financial crisis that our nation is facing. You can read the article, “Credit Canard” at http://www.snopes.com/politics/business/easescredit.asp.
I recommend that you go directly to the Snopes site to view the entire article, but here is a quote of the most significant issues:
On 30 September 1999, the New York Times published an article entitled “Fannie Mae Eases Credit to Aid Mortgage Lending” by Steven A. Holmes. The complete text of the article is available online, but in a nutshell the Times reported that Fannie Mae was easing its credit requirements for home mortgage loans in response to increasing pressure from a variety of groups:
- Clinton administration officials who wanted Fannie Mae “to expand mortgage loans among low and moderate income people” (particularly minority groups).
- Stockholders who wanted Fannie Mae “to maintain its phenomenal growth in profits.”
- Banks, thrift institutions and mortgage companies (from whom Fannie Mae purchases loans) who wanted the company to facilitate “more loans to subprime borrowers.”
In light of recent events, what caught the attention of most readers was a couple of paragraphs in the middle of the article cautioning about the possible consequences of Fannie Mae’s loosening its credit requirements:
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.
“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 way it stepped up and bailed out the thrift industry.”
Another New York Times article that has attained a significant amount retrospective interest is an 11 September 2003 article entitled “New Agency Proposed to Oversee Freddie Mac and Fannie Mae” by Stephen Labaton, which reported on the efforts of the Bush administration to create a new regulatory agency to assume oversight of those mortgage lenders:
The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.
Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.
The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.
The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.
Of especial interest to current readers were the following paragraphs about Congressional resistance to the Bush administration’s regulatory proposal:Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.
“These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”
This article seems to point the finger of blame at the Carter Administration. Further, it appears that the President Bush & his advisers attempted to thwart the problem over 5 years ago but were blocked by Congressional Democrats led by Rep. Barney Frank who is now leading the push for the $700 billion bailout!
I do not wish for this site to become a forum for political debate but I do feel that the national news media is very biased in its reporting and that we are NOT being presented with a fair and balanced view of the current issues. Some of my closest friends and family have expressed their concerns that “Bush has gotten us into this mess!” That is the message that is presented on the major TV networks. But the reality appears to be just the opposite!
What do you think?