Do They Never Learn?by Tim Manni
Here we go again. While we wanted to be the first to coin that phrase as it pertains to the recent push by two Congressmen for Fannie and Freddie to loosen their lending standards, we were beaten to the punch (it was one of Drudge Report’s top headlines today) — so we’ll have to settle for second place.
But settling for second won’t stop us from reiterating just how unbelievable we think it is that certain lawmakers have already begun to revert back to the actions and decisions that were among the basic causes of this housing crisis and the subsequent recession.
From the Wall Street Journal:
Back when the housing mania was taking off, Massachusetts Congressman Barney Frank famously said he wanted Fannie Mae and Freddie Mac to “roll the dice” in the name of affordable housing. That didn’t turn out so well, but Mr. Frank has since only accumulated more power. And now he is returning to the scene of the calamity — with your money.
Mr. Frank (D., M.A.) and Anthony Weiner (D., N.Y.) urged the CEOs of Fannie Mae and Freddie Mac to loosen their lending standards to accommodate those wishing to purchase condos, regardless of whether or not the borrowers are qualified by Fannie and Freddie’s standards. The lawmakers claim that Fannie and Freddie’s newer, more stringent lending policies “may be too onerous” and stand to threaten the recovery of the housing market:
In an interview with the paper, Weiner said the rules have “had a real chill on the ability to get these condos sold,” at a time when prices of condos have fallen enough to attract potential buyers.
Fannie and Freddie have stepped up and instituted stricter lending policies because they are still trying to pick up the pieces from the last time Congress demanded they loosen their lending standards in order to attract more borrowers. The push for the GSEs to increase their lending in the volatile condo market is the same as when “Congress…pushed for leniency for low-income borrowers and for those with spotty credit, assuring their constituencies that the American dream of home ownership would be available to all.” That was before the bubble burst.
Now, in the wake of the disaster that ensued after only a few years of lending to those under-qualified/risky borrowers, our lawmakers, those tasked with looking out for our best interests, want to repeat the same policies that got us in trouble in the first place.
Here we go again.