This financial crisis we are experiencing didn't just happen overnight and it's not going to be gone anytime soon.  Let's go back to September 1999 and read a piece from the NY Times for the rest of the story.  This is where it all started.   Read this carefully.  The emphasis  is all mine. 

Everyone is forgetting that Franklin Raines was going to be in charge of Obama's VP selection committee.  Hello?  What does that tell you?  Anyhow here's the article:

September 30, 1999

Fannie Mae Eases Credit to Aid Mortgage Lending

By Steven A. Holmes

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.

The action, which will begin as a pilot program involving 24 banks in 15 markets--including the New York metropolitan region--will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans.  Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain it phenomenal growth in profits.

In addition, banks, thrift institutions and morgage companies have been pressing Fannie Mae to help them make more loans to so-called sub prime borrowers.  These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge murch higher interest rates--anywhere from three to four percentage points higher than conventional loans.

"Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements" said Franklin D. Raines, Fannie Mae's chairman and chief executive officer..  "Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-caled sub prime market."

Demographic information on these borrowers is sketchy.  But at least one study indicates that 18 percent of the loans in the sub prime market went to black borrowers, compared to 5 percent of loans in the conventional loan market.

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 an 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."

Under Fannie Mae's pilot program, consumers who qualify cn secure a mortgage with an interest rate one percentage point above that of a conventional, 30 year fixed rate mortgage of less than $240,000--a rate that currently averages about 7.76 percent.  If the borrower makes his or her monthly payments on time for two years the one percentage point premium is dropped. 

Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers.  Instead, it purchased loans that banks make on what is called the secondary market.  By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.