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Wednesday, February 25, 2009

New York Times Article From September 30, 1999 Showcases Who Is Really Responsible For The Credit Crisis

Despite Barack Obama's bold-faced lie about deregulation being the cause for the mortgage credit crisis, the New York Times, in an article published on September 30, 1999, reveals the truth about what happened and why.

We know that it all began with the 1977 Community Reinvestment Act which required banks and lenders to make risky loans to people who didn't have the credit rating necessary to qualify for those loans.

But, as the NYT article illustrates, it was stepped up and taken to even further extremes. Now, we all know who was President in 1999, right? (Hint: it wasn't a Republican.)

Here are some exceprts from that article:

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.

Did you read that? "Fannie Mae is easing credit requirements on loans that it will purchase from banks and other lenders."

Now, why would they do that?

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 ...

Yes, you read that correctly. "Under increasing pressure from the Clinton Administration." This was also the time when Franklin Raines made millions off of Fannie Mae even though he knew it was heading for big trouble.

I wonder if Barack Obama knew about this before he told his bold-faced lie about Republicans being at fault for the credit crisis in his State of the Union Address last night?


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."

Again, more history that gets ignored by leftist politicians. It was the conservative American Enterprise Institute that saw the danger and the libs ignored it. And, everytime someone brought up the possibility that Freddie and Fannie would go under, it was libs who blocked any effort at reform.


In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

The push for making all of these subprime loans came first from the 1977 CRA (passed and signed into law by Democrats) and then later from the Clinton Administration.

Now, who is responsible for this economic crisis? (Hint: they were not Republicans.)

You can access the complete article on-line here:

Fannie Mae Eases Credit To Aid Mortgage Lending
Steven A. Holmes
New York Times
September 30, 1999

And just in case the New York Times decides to place this article into a memory hole, you can download it in .pdf format here:

Fannie Mae Eases Credit To Aid Mortgage Lending
Steven A. Holmes
New York Times
September 30, 1999

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