1977 Community Reinvestment Act, Barack Obama, and John McCain
If you’re going to debate this current financial market crisis or criticize the efforts to mitigate it, you HAVE to read this article by Noel Sheppard at Newsbusters.org:
…The Carter-era Community Reinvestment Act forced banks to lend to uncreditworthy borrowers, mostly in minority areas.
Age-old standards of banking prudence got thrown out the window. In their place came harsh new regulations requiring banks not only to lend to uncreditworthy borrowers, but to do so on the basis of race……
That’s the guts of what’s happening now. I don’t hear Obama mentioning it. And, I guarantee you won’t hear about it on CNN, ABC, CBS, MSNBC, NBC, or Daily Kos.
Something else you won’t hear any of them mention, John McCain’s speech in 2005:
“If Congress does not act,” McCain said in 2005, “American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole.”
Why he stumbled on this issue early in the week is beyond me. He should have just cited what he said three years ago.
And, the very last thing they’ll mention is this chart from IBD:
Although you’ll find Barack Obama has done quite well in a very short time, you’ll also find Hillary Clinton and Nancy Pelosi have done quite nicely as well. Of course, with the media not the least bit concerned about showing their preference for the candidate of their choice, Obama has nothing to worry about.
But, if you’ve read any of this, you’ll have an answer the next time Obama blames this on McCain, or Pelosi blames it on Bush.
Fact is, this is what you get when you compel liberal policies on the private business sector.
And you know what, even in this meltdown, Democrats are STILL trying to compel lendors to expand subprime mortgage loans to high risk areas:
Revises the duty of the enterprises to serve underserved markets. Requires them to purchase or securitize mortgage investments and to improve the distribution of investment capital available for mortgage financing for underserved markets such as: (1) manufactured housing; (2) affordable housing preservation; (3) subprime borrowers; (4) community development financial institutions; (5) assisting depository institutions in meeting their obligations under the Community Reinvestment Act; and (6) rural and other underserved markets.
The heart of that? “meeting their obligations under the Community Reinvestment Act“. Folks, that’s a bill submitted by Democrat Jack Reed less than a year ago. Although it’s not gotten very far, it just shows that the Democrats in Congress don’t have the slightest clue about what led to all this.
That’s what caused this meltdown. When risk based institutions are not allowed to mitigate their risk, they are compelled to fail.
Henry Paulson has crafted a plan to bail out the finance industry for the very short run. It’s brilliant. However, unless Congress has the balls to gut the Community Reinvestment Act, we’ll just be doing this again in ten years or less.
If cities and states are worried about slums and people not being able to get loans in high crime areas, then do something about the crime so that the risk is mitigated. Once that risk is mitigated, then the private sector will be more than happy to develope it.