The fateful history of Fannie Mae: New Deal birth to mortgage crisis fall
Book Forum

Video

Event Summary

Similar to a Shakespearean tragedy, James R. (Bob) Hagerty's recently published book "The Fateful History of Fannie Mae: New Deal Birth to Mortgage Crisis Fall" outlines a classic rise and fall — in particular, that of government-sponsored enterprise Fannie Mae, explained AEI's Alex Pollock at an event on Wednesday. Hagerty outlined how Fannie grew far beyond its humble beginnings; initially a small detail of Roosevelt's New Deal, it eventually became a subsidy to the housing market supported by a powerful group of realtors and home builders. Reforming Fannie Mae was not a major priority, said Hagerty, yet few realized the contradiction of intertwining public policy with the expectations of private shareholders.

Hagerty emphasized that after surviving several abolishment attempts and arising victorious after the Savings and Loan crisis, Fannie Mae began its ultimate ascent, hiring politicians to perfect its lobbying efforts and maintain its benefits. He then explained how Fannie's weak regulation, promises of increased homeownership, and poor accounting practices drew attention away from the swelling asset bubble of the housing market, although Wall Street was paying attention and profiting. Underestimating the risks, Fannie invested at exactly the wrong time, crumbling at the feet of American taxpayers. Hagerty concluded with a lingering question: will Congress now trust housing finance to the free market?
--Emily Rapp

Event Description

The protagonist starts humbly, progresses in the world, survives various scrapes and threats, finally grows exceedingly rich, admired, feared, powerful and exceptionally arrogant. Then come the dizzying collapse and utter humiliation. Thus there is a classic rise, hubris, nemesis and fall. It could be a Shakespearean tragedy, but it is “The Fateful History of Fannie Mae: New Deal Birth to Mortgage Crisis Fall,” a new book by James R. (Bob) Hagerty, who covered the drama of Fannie and related events from 2004–2010 for The Wall Street Journal. 

Hagerty will present his story of big-time government-sponsored finance, high and low politics, little-known history, colorful personalities, risk come home to roost and unintended consequences through the skillful lens of a veteran journalist. A panel of experts will then discuss Hagerty’s book.

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About the Author

 

Edward J.
Pinto
  • American Enterprise Institute (AEI) resident fellow Edward J. Pinto is the codirector of AEI’s International Center on Housing Risk. He is currently researching policy options for rebuilding the US housing finance sector and specializes in the effect of government housing policies on mortgages, foreclosures, and on the availability of affordable housing for working-class families. Pinto writes AEI’s monthly Housing Risk Watch, which has replaced AEI’s FHA Watch. Along with AEI resident scholar Stephen Oliner, Pinto is the creator and developer of the AEI Pinto-Oliner Mortgage Risk, Collateral Risk, and Capital Adequacy Indexes.


    An executive vice president and chief credit officer for Fannie Mae until the late 1980s, Pinto has done groundbreaking research on the role of federal housing policy in the 2008 mortgage and financial crisis. Pinto’s work on the Government Mortgage Complex includes seminal research papers submitted to the Financial Crisis Inquiry Commission: “Government Housing Policies in the Lead-up to the Financial Crisis” and “Triggers of the Financial Crisis.” In December 2012, he completed a study of 2.4 million Federal Housing Administration (FHA)–insured loans and found that FHA policies have resulted in a high proportion of working-class families losing their homes.

    Pinto has a J.D. from Indiana University Maurer School of Law and a B.A. from the University of Illinois at Urbana-Champaign.

  • Phone: 240-423-2848
    Email: edward.pinto@aei.org
  • Assistant Info

    Name: Emily Rapp
    Phone: 202-419-5212
    Email: emily.rapp@aei.org

 

Alex J.
Pollock
  • Alex J. Pollock is a resident fellow at the American Enterprise Institute (AEI), where he studies and writes about housing finance; government-sponsored enterprises, including Fannie Mae, Freddie Mac, and the Federal Home Loan Banks; retirement finance; and banking and central banks. He also works on corporate governance and accounting standards issues.


    Pollock has had a 35-year career in banking and was president and CEO of the Federal Home Loan Bank of Chicago for more than 12 years immediately before joining AEI. A prolific writer, he has written numerous articles on financial systems and is the author of the book “Boom and Bust: Financial Cycles and Human Prosperity” (AEI Press, 2011). He has also created a one-page mortgage form to help borrowers understand their mortgage obligations.


    The lead director of CME Group, Pollock is also a director of the Great Lakes Higher Education Corporation and the chairman of the board of the Great Books Foundation. He is a past president of the International Union for Housing Finance.


    He has an M.P.A. in international relations from Princeton University, an M.A. in philosophy from the University of Chicago, and a B.A. from Williams College.


  • Phone: 202.862.7190
    Email: apollock@aei.org
  • Assistant Info

    Name: Emily Rapp
    Phone: (202) 419-5212
    Email: emily.rapp@aei.org

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