The onset of the Great Depression severely damaged the construction industry, a crucial component of the economy. To ameliorate the crisis and make more funding available to prospective home buyers, President Franklin D. Roosevelt encouraged passage of the National Housing Act in 1934 and the creation of the Federal Housing Administration. To further help revive the home construction industry, Roosevelt in 1938 approached Jesse H. Jones, president of the Reconstruction Finance Corporation, to charter the Federal National Mortgage Association (FNMA, popularly known as “Fannie Mae”) as a subsidiary. This new organization, created on February 10, 1938, under President Sam Husbands and capitalized with $11 million, was authorized to purchase home mortgages from lending institutions, thereby encouraging banks, building and loan associations, and savings banks to resume making home loans. This, in turn, was expected to stimulate the home construction industry at the national level and greatly reduce unemployment. Despite its ambitious aims, FNMA proved a small operation in the late 1930s and issued only two series of obligations, totaling $29.7 million in 1938 and $55.5 million in 1939. The program then achieved greater impetus following World War II. By 1947, FNMA had purchased 66,966 mortgages worth $271 million, rendering it one of the postwar period’s most active agencies for expanding home ownership nationwide. In 1948, FNMA was authorized to purchase loans insured by the Veterans Administration.
Further reading: Gail Radford, Modern Housing for America: Policy Struggles in the New Deal Era (Chicago: University of Chicago Press, 1996).
—John C. Fredriksen
World History
