The New York Times’ memory problem
Tuesday, September 30th, 2008 By James NesbittWhile the New York Times has proven itself time and again to be of little use in providing quality news and analyses, its archive is becoming increasingly valuable for its ability to undermine and refute the paper’s own arguments. The NYT has been immensely unhelpful, and likely even detrimental, during this current financial crisis, but an article from its past (September 30, 1999, to be exact) offers some needed background that suggests different causes of the crisis than those which the NYT currently claims:
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.
…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.”
It wasn’t the failure of free markets that caused this financial mess, it was the perverse rent-seeking incentives faced by GSE officials and politicians (among other reasons). The NYT may be entirely missing the mark with its claims that deregulation and lack of government oversight is to blame, but thank goodness it was there to record the American Enterprise Institute’s amazingly accurate warning for posterity.
Tags: bailout
October 3rd, 2008 at 2:35 pm
[...] and social goals. This 1999 New York Times article, which has recently made the rounds again via those of us who want to remind the governing class of their responsibility in creating the current m…, sheds light on the thinking back then. The author, Steven A. Holmes, noted that “Fannie Mae, [...]