A blast from the past

by Russ Roberts on December 1, 2008

in Government Intervention

Here is a 1994 article from Business Week on Fannie and Freddie’s political fight against getting more involved with low-income lenders. This was very early days. Interesting to see which politicians wanted Fannie and Freddie left alone.

FANNIE MAE’S LINE IN THE SAND

FANNIE MAE, AS savvy politically as it is
financially, is fighting a Clinton Administration plan to boost
low-income mortgage lending. The Federal National Mortgage Assn., a
federally chartered private company that buys mortgages from lenders
and bundles them into bonds, has called in a cavalcade of big-time pols
to help.

At issue is a program by Fannie to spur lending for affordable housing
in urban and rural areas, to low- and moderate-income homebuyers.
Fannie chief James Johnson, a former Walter Mondale aide, is upset over
pressure from the Housing & Urban Development Dept. to focus on
minority and low-income buyers regardless of their location. And HUD
has considered making Fannie police bias by lenders, which Johnson sees
as unworkable.

Fannie Mae complains that the HUD plan would ignore the urban middle
class, potentially prompting their exodus from cities. Johnson has
enlisted the mayors of Boston, Chicago, and Oakland as well as
Representatives Barney Frank (D-Mass.) and Charles Schumer (D-N.Y.) to
lobby against the HUD plan. Their impact has been felt. The word is
that HUD thus far has backed off on the idea of Fannie Mae as an
antibias enforcer.

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{ 3 comments }

Martin Brock December 1, 2008 at 10:55 am

Very interesting. So did Frank and Schumer change their minds later? I've seen Frank deny pressuring FNMA in this direction and claim that the worst excesses of subprime lending sponsored by FNMA ended in 2007 when he took the reigns of the Financial Services Committee. I don't know how true that is, but this article doesn't support the widespread idea that Frank was a cheerleader for loose lending. Apparently, he's very friendly with Ron Paul too.

Patrick R. Sullivan December 1, 2008 at 11:54 am

I'm suspicious of this. Frank, to this day, defends the Munnell Boston Fed paper that purported to show racial discrimination in home loans. A paper that was blown out of the water by Stan Liebowitz.

Ray G December 1, 2008 at 10:18 pm

Very interesting.

94 is going back pretty far relative to the whole mess, but just judging from Frank and Schumer's own statements 10 years later, obviously their minds changed quite a bit.

Somewhere between 94 and 04, there had to have been a coming together of the political minds.

I wonder what the price was?

This would be a good Amity Schlaes or Michael Lewis book.

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