From George Will on Townhall

A New York Times article, "Fannie Mae Eases Credit To Aid Mortgage Lending" (9/30/99), reported, "Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people …" The pressure was the 1977 Community Reinvestment Act that was beefed up during the Clinton Administration. It required banks to make high-risk loans they would not have otherwise made. Failure to comply meant fines and difficulty in getting approval for mergers and branch expansion.

When questions began to arise about government policy that intimidated lenders into making high-risk loans, we received congressional assurances. At hearings investigating the solvency of Fannie Mae and Freddie Mac, Rep. Barney Frank said, ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.'' In a speech to the Mortgage Bankers Association, Frank advised, "People tend to pay their mortgages. I don't think we are in any remote danger here. This focus on receivership, I think, is intended to create fears that aren't there." Protesting against greater controls against lax mortgage lending, Sen. Harry Reid said, "While I favor improving oversight by our federal housing regulators to ensure safety and soundness, we cannot pass legislation that could limit Americans from owning homes and potentially harm our economy in the process."

I heard Frank on Good Morning America make the bald statement that there was inadequate Federal oversight in the free market.

Sounds to me like they hammered the lending institutions in to a corner and then fooled them into thinking the Govt. would protect them.

Turns out the Govt. did protect them, but not for the reasons they thought. Congress had to stop the "correction", which has only been postponed, so no blame would accrue to them.

Too much federal interference more likely.