This is probably an article that the New York Times wishes it didn't have in its archives because it reveals the true culprits behind the current Fannie Mae meltdown. You will find "uncomfortable" truths in this September 30, 1999 article by Steven A. Holmes starting with the title, "Fannie Mae Eases Credit To Aid Mortgage Lending," that you won't find in current editions of the New York Times (emphasis mine):
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.
Get that? Pressure by the Clinton Administration to expand mortgage loans by lowering its credit requirements.
''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.''
That would be the same Franklin Raines whom the Washington Post identified as a mortgage and housing adviser for the Obama campaign until that newspaper told us not to rely on its own reporting. We return you now to the article that the New York Times wishes didn't exist:
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.
Oops! And that is exactly what has happened nine years later. And who were the "killjoys" at the time warning against Fannie Mae easing the credit requirements? That answer is also provided in the NY Times article:
''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.''
Yup. The conservative American Enterprise Institute was accurately warning about this impending financial disaster back in 1999. If you don't believe me, then check out the New York Times archive.