As we move farther into the current financial crisis, it is becoming increasingly apparent how far into the past the actual events were that set the stage for what we are experiencing now. An interesting fact is that some people were warning us about what could result. Today the New York Times republished an article from September 30, 1999 written by Steven A. Holmes and titled Fannie Mae Eases Credit to Aid Mortgage Lending. The article outlines how Fannie Mae was under government pressure to increase loans to low and moderate income people thus making more loans to subprime borrowers.
One paragraph especially was prophetic:
"In moving, even tentatively, into this new area of lending, Fannis 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 a economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's."
One of the facts that is only now coming out is how long ago the seeds of the current financial mess were sown. I wish that a little more heed had been taken of the people who were offering words of caution. It was foolish to think that the good ecconomic times would be with us forever. There have always been ups and downs. It should have been obvious that we would be in trouble during the next downturn.
I would like to thank Sandy Madison - Charlottesville, Virginia Suntrust Mortgage for emailing this article to me.
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