The Financial Crisis Of 2008
820 Words
4 Pages
The Financial Crisis of 2008 has been attributed to various entities or regulations. While most of these conjectures make valid points, attributing such an immense series of events to just one or two entities or regulations is benighted. Arguably, what set the precedence for the ensuing crisis is influenced by who you ask but, a case can be made for the most apparent events that did impact the crisis. The names Fannie Mae, Freddie Mac, CRA (Community Reinvestment Act 1977), and AIG are just a few among all the conceivable notions.
A Lost Beginning
Where the 2008 Financial Crisis truly begins is hard to pinpoint. The numerous agencies and regulations involved all played a key role at different times and even those not directly involved, way before the turn of the century, still set the stage for the crisis to develop. To address two of biggest names involved, Fannie Mae and Freddie Mac, it is necessary to review why they were developed to better understand their roles in 2008. Simply put, Fannie and Freddie are GSE’s (government sponsored enterprises) that were developed to help lenders by buying mortgages from them to free up capital, allowing them to issue more loans. Fannie was developed by President F. Roosevelt in 1938 as part of the New Deal; Freddie came in 1970 to prevent a monopoly with just Fannie running the market. (cite TImes) Essentially, both do the same, and the process flowed well for many years, banks made loans, Freddie and Fannie bought them, securitized
A Lost Beginning
Where the 2008 Financial Crisis truly begins is hard to pinpoint. The numerous agencies and regulations involved all played a key role at different times and even those not directly involved, way before the turn of the century, still set the stage for the crisis to develop. To address two of biggest names involved, Fannie Mae and Freddie Mac, it is necessary to review why they were developed to better understand their roles in 2008. Simply put, Fannie and Freddie are GSE’s (government sponsored enterprises) that were developed to help lenders by buying mortgages from them to free up capital, allowing them to issue more loans. Fannie was developed by President F. Roosevelt in 1938 as part of the New Deal; Freddie came in 1970 to prevent a monopoly with just Fannie running the market. (cite TImes) Essentially, both do the same, and the process flowed well for many years, banks made loans, Freddie and Fannie bought them, securitized