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Why Did Fannie Mae Fail?

With all that is going on in the mortgage and banking world right now, don't you wonder WHY? Why did this mess begin? What started it? Didn't anyone see it coming?

Yes - someone saw it coming. The New York Times actually reported it coming back on September 30th in 1999. How many years ago is that? Maybe it was while Clinton was President, not George Bush....

In 1999 Steven Holmes from the New York Times wrote that Fannie Mae was under extreme pressure from the Clinton Administration to expand mortgage loans to low and moderate income people. In doing this "Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times.... but 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".

Do you remember the 80's when WE bailed out the savings and loan industry? Often times we forget our past, our history and with that we repeat it over and over. Bailout - something new? NO WAY! We do it over and over and over. As much as I disliked my history courses in school and as much as my husband will razz me over saying this....

Maybe we should pay more attention to our past so we do not continue to repeat it but instead make better choices for our future.

Susan Hilton - Realtor & Sales Trainer for Century 21 Beal

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Original post - College Station Real Estate #1 in Customer Service

Posted by Susan Hilton Texas Aggie Real Estate College Station Bryan Texas Real Estate on 10/10/2008 10:42 AM

Comments (15)

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Originally posted at: Bryan College Station Real Estate: Why Did Fannie Mae Fail?

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15 Comments on Why Did Fannie Mae Fail?

OCT

2008

Hi Susan, That is so easy to forget. Greed, Greed, Greed. You would have thought we would have got a clue because of the dot com bomb, but we all want to get rich quick. It is no wonder Greed is one of the seven deadly sins. It will get you every time.

Remember the old saying "pigs get fat and hogs get slaughtered"

Oh, Susan, you're dead-on with this one! So often people forget that we've been there, done that and don't learn from our lessons! Hopefully THIS history lesson that we're in the midst of will resonate for generations to come!

BTW--I received your AWESOME card! Is this a business of yours too?

Debe in Charlotte

Susan - Great Post! We really need to learn from history. Hopefully this will force consumers to become more educated and responsible.

Susan, Do you think the legisltors we put in office have learned anything from this? I certainly hope so.

I got the following message sent from AR but with an email address that doesn't work.

Email: hochiminh@aol.com
Subject: Your Fannie May failure comment

Hmm...a Texas republican blaming someone other than tiny george for the financial problems associated with the Fannie May failure? How surprising. Perhaps you should go further back in history and look at a man named Roland Arnall from a now defunct lending company called Ameriquest. He's from Texas too and the largest individual contributer to both of tiny george's presidential campaigns. He is also the inventor of the subprime and creative mortgage schemes which flat-lined Fannie and Freddy. Facts are more viable than opinions from Texas-biased republicans realtors. Stick to your day job.

I tried to reply with -

Thank you for your comment! I don't in any way think the blame does not also lie on George Bush's shoulders. I think they are ALL at fault right now. I'm looking forward to the election to vote out all the establishment and start over with people who are not the old guard. I want LESS government interference. People who can afford to pay for their properties should get the loans and no one else. If a bank makes a bad decision then the company should take the heat and the loss - not the rest of America. No one bails me out when I make a bad business decision. Yes, we are a bit of the "Texas-biased republican Realtors" around here but this info was from the New York Times reporter. Last time I checked they weren't in Texas or Republican biased. :)
Have a fabulous day and lets all go out and vote to bring a little bit of order to the political process.

Susan: Here is the link to the VERY POPULAR DEMOCRATIC PUBLICATION, The New York Times, article written in 1999 to compliment the Clinton administration for its efforts...

http://query.nytimes.com/gst/fullpage.html?res=9c0de7db153ef933a0575ac0a96f958260&sec=&spon=&pagewanted=1

You can also visit the Harvard University website to find their report cited in the above article.

How's THAT for FACT, not day-working-Republican-biased real estate agents from ALL across AMERICA!

Finally, I am an American and proud of our freedom of speech, which allows us to give our opinions anyway!

Put that in your pipe Mr.-Won't-Even-Give-Your-Real-Name-When-Commenting...

Debe in Charlotte

Hi Susan, Here's the article you are referring to

Fannie Mae Eases Credit To Aid Mortgage Lending

on the New Yorks Times. Fannie Mae Failure. OOOppppp....... Sorry Debe beat me to it. You go girl.

Well that just went really great, didn't it. Eases Credit. Look who's paying the price now. &%$&$#*(&%# we are.

~ Newbie

OCT

2008

Susan- Great response to that email! This CRS started back when Jimmy Carter was Pres. He is the one that created this and then the Clintons pushed it and pushed it, then along came ACORN! Hmmmm, doesn't anyone get the picture? Even CNN came out with reports about ACORN and this mortgage mess that was being blamed on the banks when all along it was REGULATION that created this mess that people say was caused by lack of regulation. Government needs to take its nose out of where it don't belong! Katerina

OCT

2008

Sorry, but the FACTS just don't fit your argument. The subprime loans which have failed (gone to foreclosure) haven't even hit 10%.

What DID cause this crisis is DE-regulation. Allowing banks to act as investment firms and start buying and selling these packages of bad loans which were all rated AA and AAA when they obviously were not.

Don't blame the poor, when it was the rich and their greedy schemes that caused the panic.

Why would you ask for LESS government when it was DE-regulation that led to this fiasco.

You did mention that banks should only loan to those who can REALLY pay it back. Well, that sounds like regulation to me. If you regulate that banks have to give out "common sense" loans (yes, even to those nasty poor people who WILL pay it back) - AND - you regulate that banks can't sell off their loans...

then you wouldn't have this problem.

PS. will someone PLEASE accept responsibility for the 8 years of a REPUBLICAN president. and 6 of those 8 years of REPUBLICAN control in the Senate and House. Everyone here deserves blame...but PLEASE, going all the way back to Carter and Clinton? Get serious.

Rafael - banks should only make loans to people that THEY believe can pay them back and should not be regulated and made to make loans to unqualified people.

Obviously.

Of course Banks "Should" only make loans to those They believe can pay them back.

But if you LET them (by not regulating) they clearly WILL take the greed path of making bad loans as long as they know they don't have to wait to be paid back because they can UNLOAD them to other people as Mortgage Backed Securities.

Look, the unregulated corporation (in this case Banks) will ALWAYS do what's profitable instead of what's right.

That is why you need MORE and BETTER regulation to force them to live with the loans they wrote.

You can't just pray and hope that they'll do the right thing. "Should" doesn't count for much.

Rafael - I agree that there should be some regulations but there should NEVER be regulations where banks are required to invest in areas or people that are not qualified!

Susan, I believe the part of the legislation you are referring to here was written by none other than Phil Gramm. Phil Gramm was also responsible for that awful legislation that took effect Jan 1 1986, The Gramm/Rudman act that killed real estate investment and hurt us so much here in Texas. I remember those lean years and it scares me silly to think he is still trying to advise anyone in economics. Texan or not he should just retire to the ranch.

Ricki - YES - he needs to retire! There are many who need to retire or go to jail - Republican and Democrat.

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