Thursday, February 26, 2009
Economic Time Warp
From The New York Times, Feb. 30, 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."
1999 - That would be the Clinton administration encouraging risky mortgage lending.
Late the article prophetically states:
"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."
I'd love to say the mortgage industry collapse was just an unintended consequence of a noble cause - enabling low income folks to own a home. It would make the current situation palatable - in a warm and fuzzy way. Unfortunately, it's simple not true. The current situation is fallout akin to Mr. Spock doing a mind meld between greed and stupidity. ¶ 26.2.09
"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."
1999 - That would be the Clinton administration encouraging risky mortgage lending.
Late the article prophetically states:
"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."
I'd love to say the mortgage industry collapse was just an unintended consequence of a noble cause - enabling low income folks to own a home. It would make the current situation palatable - in a warm and fuzzy way. Unfortunately, it's simple not true. The current situation is fallout akin to Mr. Spock doing a mind meld between greed and stupidity. ¶ 26.2.09
