The answer was NEVER to give ANYBODY a mortgage for ANY AMOUNT with NO MONEY DOWN.
Not just that — the real answer is to ALWAYS charge a risk premium commensurate with the credit rating of the borrower. Basic finance principals were ignored by Clinton and cronies for the sake of “fairness.”
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.''
CLEARLY this problem was initiated DURING the 'Toons watch - as were many others - and this was essentially a decision made IN the executive branch, not the legislative.
In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.
Great job, Bill.