Conservationist
09-27-2008, 09:30 AM
In 1999 there was roughly $5 trillion in total U.S. mortgage debt. That number ballooned to $12 trillion by 2007, and we know what happened from there (data is from the U.S. Office of Federal Housing Enterprise Oversight). To put this into perspective, total U.S. GDP is about $11 trillion annually, and U.S. government debt is around $9 trillion. If the housing market really falls apart (meaning more than conservative estimates of a 20% drop), there’s no way the government can simply cover these losses.
Why did it happen? Let’s go back to 1999, when Fannie Mae, the nation’s biggest underwriter of home mortgages, was under pressure by the Clinton administration to find a way to get more loans to “borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans.” A pilot program was launched, which soon became general policy. Money flowed to people who couldn’t afford to pay it back.
How The U.S. Government Engineered The Current Economic Crisis (http://www.techcrunch.com/2008/09/26/the-us-government-engineered-the-current-economic-crisis/), TechCrunch
So: the current economic crisis was caused by actions almost a decade ago, when for political reasons our financial apparatus was encouraged to do what does not make sense in the physical, mathematical world of commerce.
Shows what gov't is good for: subsidizing the clueless at the expense of everyone else.
But they did it with good intentions:
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.
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.
Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.
Fannie Mae Eases Credit To Aid Mortgage Lending (http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F9582 60&scp=1&sq=&st=nyt&rss), The New York Times
Why did it happen? Let’s go back to 1999, when Fannie Mae, the nation’s biggest underwriter of home mortgages, was under pressure by the Clinton administration to find a way to get more loans to “borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans.” A pilot program was launched, which soon became general policy. Money flowed to people who couldn’t afford to pay it back.
How The U.S. Government Engineered The Current Economic Crisis (http://www.techcrunch.com/2008/09/26/the-us-government-engineered-the-current-economic-crisis/), TechCrunch
So: the current economic crisis was caused by actions almost a decade ago, when for political reasons our financial apparatus was encouraged to do what does not make sense in the physical, mathematical world of commerce.
Shows what gov't is good for: subsidizing the clueless at the expense of everyone else.
But they did it with good intentions:
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.
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.
Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.
Fannie Mae Eases Credit To Aid Mortgage Lending (http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F9582 60&scp=1&sq=&st=nyt&rss), The New York Times