Tuesday, September 30, 2008

1999 Article on Fannie Mae Predicts Current Crisis

Here is an article from 1999 talking about Fannie Mae pressuring banks to offer subprime mortgages under pressure themselves from Bill Clinton. The CEO at the time was Raines.

"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.''"

How interesting -- a free market economist predicted this would happen. Well, it's not so much interesting to me as expected. Seeing that a free market economist predicted this, it doesn't sound much like a market failure as a government failure. Again.
Post a Comment