Financial Crisis about Fannie Mae Research Paper

pecuniary Crisis about Fannie Mae - Research Paper ExampleThe Congress and President Roosevelt then passed a bill allowing for the establishment of Fannie Mae in order to freeze up capital by buying owes from lenders (Birger 38). The company was therefore lease by the Federal Housing Act of 1934 to relieve the housing problem and increase homeownership among Americans. The primary habit of Fannie Mae was to develop a secondary mortgage aimed at rejuvenating the pecuniaryly strapped lenders such as loans and saving associations, mortgage banks, and commercial banks. Being a charted financial institution which is regulated by the Federal Housing pay Agency (FHFA), Fannie Mae was not affected by the Gramm-Leach-Bliley Act of 1999 (Birger 44). Before the 2008 housing bubble burst, Fannie Mae was very successful. However, the tholepin in home prices and mortgage securitization changed the mortgage and housing sectors, which culminated in plummeting property values and foreclosures . The subprime events are partly blamed for unethical considerations by the lending institutions. However, the weight of the crisis can be explained by the global financial contagion, which was inevitable and hence characterized as bad luck. Following the global financial crisis, all the financial and character institutions either were either culprits or victims. The financial hardship period was met by a higher ground level of defaults in the loans and credits advanced to potential borrowers. On their part, Fannie Mae was blamed for their inability to regulate and control ingrained affairs which included poor accounting and credit policies (Birger 45). After the real estate cratered, it was criticized for being ineffective to safeguard their investment portfolios. Having heavily invested in the subprime-backed securities, a higher rate of default in the mortgage industry adversely affected the company.