Disasters, I’m convinced, occur not because of one drastic misstep but because of a series of disparate, often unrelated occurrences. Remove any one of those occurrences and the disaster would not have happened.

Take the sinking of the Titanic in 1912 that claimed 1,517 souls.

Some iceberg warnings radioed from other ships didn’t get passed from the Titanic’s radio operators to the bridge. She sailed too fast for the conditions. The unusually calm sea and moonless night made detecting icebergs difficult. Lookouts didn’t see the fateful iceberg soon enough. The engineering of her propellers made the Titanic hard to turn in reverse. Mismanufacturing of the rivets made them brittle. Designers made the Titanic able to float if four below-deck compartments flooded, but the iceberg buckled the steel leading to five. The ship’s owners decided to carry enough lifeboats for half the folks on board despite room for more. A nearby ship that could have rescued the Titanic’s passengers had shut down its wireless radio for the night.

You get the idea. Remove any one of those factors and history could read much differently.

So when history writes the story of The Great Financial Collapse of 2008, how will it read?

Well, Steven A. Holmes wrote it already.

For The New York Times. In 1999.

He opened the Sept. 30 story with an upbeat tone:

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 … 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.

Who wouldn’t like that? At a time when dot-com mania had increased wealth, at least on paper, more Just Plain Folks would get help to own their own homes.

But Fannie Mae didn’t think up the idea.

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 its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime 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 much higher interest rates – anywhere from three to four percentage points higher than conventional loans.

The pressure to make even more money with much riskier loans worked. After the announcement, the stock market had its best three-month run-up in years – the Dow Jones rose nearly 1,400 points. Fannie Mae stock went from $60 a share to $72 during that span.

Fannie wouldn’t do this all by itself. It enlisted the full force and enthusiasm of the nation’s banking industry.

Fannie Mae … does not lend money directly to consumers. Instead, it purchases 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.

Can you say, “WaMu?”

But the Fannie Mae announcement didn’t come draped in Pollyanna’s blind optimism. Holmes included this prophetic warning:

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 1980s.

“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 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.”

Should we have seen this disaster coming? Well, during roughly the same time span that Fannie went into its home-loan frenzy, officials in the administration of President Clinton deliberately killed a plateful of proposed financial system regulations.

In an investigative report issued Thursday by the nonprofit news organization ProPublica, Arthur Levitt, chairman of the Securities and Exchange Commission from 1993 to 2001, says the federal government could have prevented credit markets from becoming so precariously balanced they were “milliseconds” from disaster.

“That was a point in history when perhaps we should have anticipated something like where we are today, at least the possibility,” Levitt said.

Ultimately, the Clinton administration decided the financial industry could best govern the market. Because to impose federal regulations and oversight might put a damper on U.S. economic growth.

So here we sit. At the bottom – or near it – of a deep financial ocean. Because of a combination of missteps. Watching the value of our homes, investment portfolios and 401K plans plummet.

I don’t know what we have learned. Except that the U.S. economy, like the Titanic, is not unsinkable.

Dan Voelpel: 253-597-8785

dan.voelpel@thenewstribune.com