http://www.nytimes.com/2008/10/05/business/05fannie.html?pagewanted=1&hp
Although seemingly in-depth on the surface, this article is typical of the NYT’s when their agenda is culpable.
There is only a brief mention of Barney Frank. No mention the #1 and #2 largest recipients of GSE money – Dodd and Obama. No mention of the constant attempts by the GOP over the last decade to strengthen oversight and reform the GSE’s – reforms viciously attacked by Barney Frank and his posse. No mention of congress overlooking the GSE’s creating what amounted to a MBS hedge fund to increase earnings – which had nothing to do with their charter but greatly increased risk.
The comment about charging higher fees for riskier loans to offset risk doesn’t make sense. If the capital ratio doesn’t change then these fees aren’t retained to offset losses. They just goose earnings that lead to larger bonuses for the executives and the investors.
The Countrywides of the world would never have generated all the questionable loans if the GSE’s weren’t being pushed by Congress to aggressively expand “affordable housing”.
A casual reader of this story would largely be led to believe that they were rouge agencies and that Congress had a limited role in our financial crisis.
The other root cause of the crisis rests with the ratings agencies. They’re rating of MBS’s as ‘AAA’ that clearly were not, combined with Greenspan’s and Japan’s ‘free’ money meant that financial institutions and investment banks were comfortable in taking on leverage levels that otherwise would have been insane. I am actually quite surprised the S&P’s of the world have not been driven out of business by massive class action suits.
Almost everything of consequence in the financial crisis can be traced back to these two root causes.
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