Rambling Rhodes

Blame Can Be Shared Like Cake and Ice Cream

So, yeah, this whole financial meltdown, crisis, disaster, TRAGEDY unfolding on Wall Street right now? Could we please stop trying to pin it on any one political party? Because, let's be honest here, greed is pretty much a bi-partisan failing.

And, as is often the case, the road to this meltdown of volcanic proportions was paved with the bestest of 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.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

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.

That's from an article dated September, 1999, so the seeds of this thing have had plenty of time to take root. Hindsight is always 20/20, if not better, but just reading that excerpt, you can't help but be struck by how ill-advised it seems to extend loans to people who have generally proven to not be particularly good credit risks. The whole "Give a man a fish, he'll eat for a day; teach a man to fish, he'll eat for a lifetime" thing sort of comes to mind, except it's more like "Give a man a loan, he won't pay it back; give that man another loan, what the fuck are you thinking?"

Of course, those higher risk loans came equipped with higher interest rates, so it's sort of, kind of, understandable why those loans were handed out; I'm sure it all looked really good ON PAPER. It's just that the reality of giving loans to people who probably won't be able to make payments just took a decade or so to kick in. You'd think some sort of oversight would have just been built into such a system. But, what fun would that be? Regulation is SUCH a pain.

It's all very perplexing to witness from my perspective. Then again, I took out a home loan I knew I could afford (in fact, I pay extra each month), and I've always been terrified of debt in general.

Just seems unfair that I'm going to end up paying for this thing, one way or another.

Posted by Ryan at September 23, 2008 08:34 AM | TrackBack