Fannie, Freddie and Bill Clinton: How We Got Into This Mess

Why did Fannie Mae and Freddie Mac fail? Let's revisit a prescient September 30,1999 article from none other than the New York Times, which describes the point at which the GSEs jumped the tracks:

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The article goes on to describe the political backdrop:

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 and felt pressure from stock holders to maintain its phenomenal growth in profits.

And then the dead-on prediction, also from the same article:

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

You can read the entire article here.

Government is great at sneaking up behind you, sneezing, then putting its hand out and asking for money, promising to provide the cure when you're only turning around to see what disease just hit you in the first place.

Frustrated? The question is: who's worse, those on the political left who built the foundation for this mess, or those on the right who are unwilling or unable to accurately identify the culprit?

As we watch these preposterous bailout hearings on Capitol Hill today, the phrase "the inmates are running the asylum" has never seemed so germane.