How we got here

Newsbusters has found another 1999 article praising the Clinton administration policies that led to the subprime meltdown, this time in the New York Times. It’s not quite as explicit as the LA Times article; it doesn’t mention (as the LA Times article did) how the Clinton administration, through Fannie and Freddie, pushed for securitization of mortgages. But, it still mentions how they pushed lenders to make loans that we can now see were irresponsible:

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.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.

”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.

(Yes, that’s the same Franklin Raines that later faced legal difficulties, and still later was reported to have advised Barack Obama on economics.)

Note that, like the LA Times article, this is not a retroactive attempt to pin blame. Both articles were published long before any problems were visible, and, more importantly, both articles are positive portrayals of Clinton Administration policy.

The two articles put paid to the idea that our current woes are the result of Republican deregulation policies. Our current woes are the result of Bill Clinton’s housing policy, which pushed for lenders to make irresponsible loans, and pushed for those loans to be securitized and traded. Then in 2004 and 2005, there were efforts to rein in Fannie and Freddie, but those efforts were successfully blocked by Democrats.

Even when the subprime market melted down, and mortgage-backed securities began to fail, the Democrats still didn’t learn. When Fannie and Freddie were already in freefall, just two days before their bailout was announced, Christopher Dodd (D-CT) pronounced “They’ll be fine,” adding they were “fundamentally sound and strong.” That’s the same Dodd who was the #1 recipient of Fannie and Freddie campaign contributions. (The others incidentally, were the Democrats’ actual and presumed presidential candidates of 2004 and 2008: Kerry, Obama, and Hillary Clinton.) And that same economic genius was chosen to lead the negotiations for the current bailout.

(Previous post.)

UPDATE: “Barney Frank’s fingerprints are all over the financial fiasco.” (Via the Corner.)

UPDATE: Had the LA Times confused with the Washington Post. Fixed.

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