If you want to get deeper into the history of the mortgage meltdown, The Wall Street Journal has a page of links to its past articles. Here are a few titles and dates to give you an idea.
• Inside Fannie 03/19/02 – Fan and Fred don't function like other companies. They're allowed to pile up debt, implicitly guaranteed by taxpayers, without being held to even the minimum of corporate governance standards.Go to the page for links.
• Frantic Fannie 02/28/02 – Companies taking on so much risk and debt, and backed by taxpayers, ought to be more transparent in what they tell the world.
• Fannie Mae Enron? 02/20/02 – Fan and Fred look like poorly run hedge funds: lots of leverage and snarkily hedged risk. Does the word Enron ring any bells?
Here is a relevant bit from the New York Times from 2003.
The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.Did the new oversight plan get passed by Congress? What do you think? I'll save you the trouble of looking it up. No.
Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.
The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.
The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.
Cross Posted at Classical Values