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Cause of Fannie Mae’s Conservatorship

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  1. Introduction
  2. Historical Background
  3. Hypotheses Addressing Cause of Fannie Mae's Conservatorship
  4. The Missed Opportunities to Curtail Fannie Mae's Spending by the Bush Administration
  5. Fannie Mae was irresponsible and was predisposed to Fail as a GSE
  6. Analysis of the Clinton Administration's Push for the CRA and Repeal of the Glass-Steagall Act
  7. Analysis of the Fault of Fannie Mae and the Inherent Disadvantage of a GSE
  8. Analysis of the Researcher's Hypothesis concerning the growing gap between Maximum Mortgage allowed and Median Household Income
  9. Conclusions and proposed solutions

Everyone should have a home despite their economic struggles. Fannie Mae was founded on this premise during the Great Depression in 1938. The issue evolving from this seemingly beneficial and civil service sponsored by the government is the risk involved with lending to subprime borrowers. The following research will look at the failure of Fannie Mae, resulting in conservatorship, and determine if the cause of the failure was the Clinton administration pushing too hard to lower lending standards and implement the Community Reinvestment Act, the repeal of the Glass-Steagall Act, the Bush administration missing opportunities to curtail the subprime lending of Fannie Mae, or if Fannie Mae lent irresponsibly without keeping itself in check coupled with the inherent problems associated with being a Government Sponsored Enterprise (GSE). Each of these hypotheses will be compared by determining if regulation by the federal government could have prevented the conservatorship that was mandated in September 2008. The use of regulation as a variable to determine the hypothesis that could have been prevented to the greatest extent will be the focal point to answering why Fannie Mae fell into the conservatorship of the government. Finally, the research will look at the chosen hypothesis to construct a solution to the failure of Fannie Mae.

[...] Part III: Research Analysis of Proposed Hypotheses This portion of the research will compare each proposed hypothesis; determine the validity of it being a cause to Fannie Mae's conservatorship, and single out which hypothesis was the greatest factor in the resulting conservatorship. The method used to compare each hypothesis will be to determine if regulation had been imposed, would it have prevented the events of the hypothesis from having a hand in the downfall of Fannie Mae. The hypothesis that would have benefitted from regulation the most will be considered to be the greatest cause of the collapse. [...]


[...] The observation of Fannie Mae by the Treasury Department could have stopped the problem before it got any worse. The denial of this legislation in 2003 was mirrored in 2005 when the Federal Housing Enterprise Regulatory Reform Act to reform the GSE regulatory structure died in the Senate. This bill could have also been the answer to stopping Fannie Mae from digging its own grave. Seeing as how this hypothesis is centered on the effect that regulation could have had on the demise of Fannie Mae, it is safely redundant to say that regulatory measures could have been made to see that governmental interference in Fannie Mae's transactions would have helped. [...]


[...] Serving Two Masters, Yet Out of Control Fannie Mae and Freddie Mac. New York: AEI Print United States. Executive Office of the President of the United States. Budget of the United States Government Fiscal Year 2002. Print United States. Subcommittee on HUD Oversight and Structure. Committee on Banking, Housing, and Urban Affairs. Print Reiss, David. "THE FEDERAL GOVERNMENT'S IMPLIED GUARANTEE OF FANNIE MAE AND FREDDIE MAC=S OBLIGATIONS: UNCLE SAM WILL PICK UP THE TAB." Web. "Fannie Mae Historical Conventional Loan Limits." Fannie Mae. [...]

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