Soon, Congress will revisit the recently defeated bailout legislation in an effort to tweak it and make it palatable to Republican members of the House. In the meantime, conservative commentators will continue to ask U.S. representatives to oppose the bailout; Old Media talking heads like Keith Olbermann, Chris Matthews and Rachel Maddox will tell us we should support it; and congresswomen like Maxine Waters will imply we are racist if we don't. And if the past is an indicator, an honest (politically incorrect) examination of how we got here in the first place will not be part of the dialogue. That's where this column comes in.
On Sept. 30, 1999, Steven A. Holmes had an article in the New York Times titled: "Fannie Mae Eases Credit to Aid Mortgage Lending." The article described how the Clinton administration pressured Fannie Mae "to expand mortgage loans among low and moderate income people ... whose credit [was] generally not good enough to quality for conventional loans." According to Holmes, one of the goals of this expansion was "to increase the number of minority and low-income home owners who tend to have worse credit ratings than non-Hispanic whites."
This policy shift, which included significantly "reducing down payment requirements" as well, was nothing less than "affirmative action meets mortgage loans," and as we see today, the results have been near disastrous.
Once the Clinton administration succeeded in expanding the scope of Fannie Mae loans based on race, everyone who knew what was going on should have known that things weren't going to end well. During the investigative work for his article nine years ago, Holmes recognized that "Fannie Mae [was] taking on significantly more risk, which may not pose any difficulties during [strong] economic times," but which would "run into trouble in an economic downturn." (Aren't we in an economic downturn?)
Prophetically, Holmes predicted that when the bottom did fall out it would "[prompt] a government rescue similar to that of the savings and loan industry in the 1980s." I am not trying to take anything away from Holmes by saying he could not have been alone in realizing where this train-wreck was headed. The only thing worse than the fact that Clinton was in the White House promoting loans for people who could not afford them was the fact Franklin D. Raines was in the government's mortgage house justifying the issuance of even more loans for those same people.
After bragging about how Fannie Mae had "expanded home ownership for millions of families in the 1990s," then-CEO Raines intimated that Clinton's proposals were necessary because too many borrowers had credit that was still "just a notch below" what were then current standards. And because we're dealing with Democrats, the solution was to not to encourage the would-be borrowers to better their credit then re-apply, but simply to lower the lending standards.
It's no wonder that just three years later, in 2002, Fannie Mae accountant Roger Barnes started getting nervous over the fact that a lot more than credit standards were changing. He feared the books were being cooked and asked Raines to investigate it. (Credit to Barnes for eventually leaving the government mortgage house when it became evident Raines had no intention of investigating.)
I'd say it's a safe bet that the reason the Old Media's talking heads talk so much is because they want to keep us from thinking about how we got here in the first place. And in light of the foregoing paragraphs, it's not a bad idea on their part. Because when regular salt of the earth people, who worked till their backs ached and their hands callused to save enough for their down payment and their house payments, find out that some people got a pass on those kinds of things because of their color, it's going to be much harder to pass this legislation.
The same colorblind people who gave millions of dollars worth of food, clothing and medical supplies to Hurricane Katrina victims, only to be called "racist" by some of the recipients for not giving them new cars as well, are not going to be overly motivated to support a $700 billion bailout which in large part covers Fannie Mae – a Democrat run mortgage house that has been dispensing loans based on skin color and socio-economic status rather than the ability of the borrowers to repay their loans.