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:
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:
Fannie Mae and Freddie Mac financials contributions from 1989-2008 (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:
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.
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Peter on 09.26.2008
I find the acrobats that the Republicans are going through right now to lay, yet another policy disaster at the feet of the Democrats. Yes, of course it must be Carter’s fault that the economy is on the verge of collapse, it would have nothing to do with the constant whittling of safety-valve regulations and oversight and the progressive de-toothing of government agencies who should’ve been providing a natural check & balance to the industry desire for less of all those things and greater profit and riskier financial ponzi schemes. And they got away with it because the free-market after REagan and the fall of the Berlin wall became a golden calf, a false God. An all powerful and infallible entity based on the fact that it had defeated Communism and St. Ronald Reagan had given trickle down economics (also called voodoo economics by Bush I) his blessing.
If Carter and the Dems created this than why didn’t this happen sooner?
I’ll tell you why: Because it took Bush and his rubber stamp delusional Congress to take away all healthy controls from the Community Reinvestment Act. Republicans basically killed the golden goose here. They bet the farm on an illusion of endless profit and prosperity conjured up from thin air and specualtion. Mortgage debt? Let’s sell it at a profit!! Not necessarily a bad idea, but what was a bad idea is what a Republican Congress did to the CRA in 2005. They basically allowed any investment bank with funds up to a Billion dollars, whereas previously it had been instituions with assets only adding up to $250 million, to give away mortgages to anyone and everyone with the least amount of good faith lending that requires a the buyer of a mortgage to truly be able to make the payments to what they’re getting and not get hit with a disasterous ballon payment 4 years down the road and then, HIDE THAT VERY SALIENT FACT 23 PAGES INTO THE CONTRACT AS A FOOTNOTE TO A FOOTNOTE.
But this is what goes on when you’re given governmental approval to swindle and wheel and deal and then repackage your CON JOB into further profits in the form of bundling that faulty product in with a few thousand other faulty monetary products and sell it.
Enough.
The GOP, will pay for this. You people can spin it until judgment day, but this is YOUR HOUSE OF CARDS. As is that other disaster, also the product of a delusional and incompetent President & VP known as IRAQ. But I digress. Hopefully you people are out of office for a generation for these catastrophes you’ve lade at the door of every American family.
Moon on 09.26.2008
You’ve got your facts totally wrong.
100% completely backwards.
Bush asked for more controls over Fannie and Freddie in 2003. The Democrats, particularly Barney Frank, protested and killed it. He tried again in 2005. John McCain said something had to be done or they would collapse, Chris Dodd and Barney Frank protested. Nothing was done.
The reason it’s happening now is because the administration of Fannie Mae was caught cooking the books in 2003. Wanna check who was on the board at that time? It wasn’t Bush appointees. When that happened, Bush’s people instructed the regulatory agencies to adjust how assets and liabilities were reported. basically, it forced these companies to be much more liquid than they had been in the past. What it actually did was expose their corrupt practices.
So, pretend all you want that this is a Republican issue only. That’s what Nancy Pelosi is trying her best to do. Problem for you and Nancy is, even Bill Clinton says he’s partly to blame for insisting that everyone is entitled the opportunity to own a decent home. I’m quite certain Jimmy Carter will take full credit for the Community Reinvestment Act and assure you even now that ignoring risk for the sake of the common masses is still a good thing.
This is purely the result of liberal policies corrupting the economic process once again. You can make all the claims you want, but I’ll show hard core evidence every single time you do.
And the annoying thing to me is how the media is working their asses off to not allow anyone to know how involved in all this Barack Obama is.
As far as the Republicans “paying for it”, so far, polls indicate just the opposite.
Bob (Robert Black) on 09.27.2008
Jimmy Carter’s administration planted the seeds, but Bill Clinton’s administration watered and fertilized them, especially with a revision of the housing laws in 1995. Then Chris Dodd, Barnie Frank, and others in Congress stood guard over the garden!
You can google the history of the Community Reinvestment Act and find that, during Clinton’s administration, Henry Cisneros strongly supported expanding government-backed mortgage programs to reach more and more poor. He did so under penalties of law-suits and government fines. See this story, for example: http://www.washingtonpost.com/wpsrv/politics/special/cisneros/stories/cis113096.htm
At the time of Cisneros’ 1996 retirement, this Washington Post article told a highly favorable story about Cisneros’ accomplishments in forcing bankers to lend to the poor, but it reads much differently today! What are the long-run effects of compelling, by force and by fine, bankers to abandon their long-standing rules for sound mortgage lending? We are seeing the disastrous effects now, even while Barack Obama and John McCain call for more regulation. Perhaps investment banking needs to be reined in, but government regulations created much of the sup-prime mortgage mess that fed the housing bubble and created financial chaos (aided and abetted by Bear Stearns’ Collaterlized Debt Obligations and other financial innovations).
How could 1995 polices be at the root of the problem today? It took time for an industry of sub-prime mortgage lending to develop, encouraged by Countrywide, WaMu, IndyMac, as well as by relaxed rules at Fannie Mae and Freddy Mac that allowed them to underwrite the sub-prime loans. Furthermore, the Fed’s easy money policies of 2002 to 2004 fanned the flames of housing fervor, and then the abrupt end to the Fed’s easy money in 2005 and 2006 burst the housing bubble. That was when housing prices began to plummet.
Chris Dodd (D) interviewed on CNBC recently, blamed all this current mess on the “foreclosure” industry, but that is a too-brief and unfair history that blames the bankers for expecting repayment of loans. Those unsound loans had to be written first before they could be called in for non-payment! Again government policy encouraged the lending fury. One half of all the U.S. mortgages and 90% of subprime mortgages in the last few years were passed through to Fannie Mae and Freddy Mac. If local private bankers had still controlled mortgage lending, perhaps more could have arranged workout deals, as they are now. Moreover, with home prices falling and their equity gone, many people simply abandoned their homes voluntarily, not waiting for foreclosure. So Dodd should be concerned with telling a longer history. But how did we get to this point?
An important aspect of the problem was the twin aspects of banking-rule changes. First bankers had to write what they formerly would have considered bad loans. Second, bankers could pass most of these bad loans through to Fannie Mae and Freddy Mac. For a mortgage fee, bankers became simple hucksters, trying to push through as many mortgages as they could, all due to rule changes imposed by the U.S. government. They no longer had the incentive that holding mortgages inside the bank for 30 years would give them: to scrutinize loan customers extremely carefully!
It took time to grow, but this weed is now huge and noxious. And yes Jimmy Carter planted the seeds, Bill Clinton and Henry Cisneros watered and fed the plants, and Chris Dodd and Barnie Frank stood guard over the garden. Were Republicans complicit? Without doubt, they sat idly by, except for certain watchdogs in Bush’s offices and for John McCain. But these housing policies are Democratic creations that have ultimately failed the poor they tried to serve. And the patterns of Fannie Mae and Freddy Mac lobbyist giving (posted on this page) support this claim.
Moonage on 09.28.2008
Nice comment Bob. Pretty much echoes what I have been saying here. My take is a little broader tho. I don’t paint it so much as a Democrat vs Republican issue so much as a liberal vs conservative fiscal policy. The two don’t mix at all. If the lessons of what happened aren’t absorbed, then given what happens in 30 years, we could have Republicans, or Greens, or whoever in charge. If they meddle in the free market, someone gets screwed. It just so happens at this point in history, the Democrats are the ones that keep dicking around with the free markets with their socialist attitude that “everyone deserves…..”. No, they don’t. Given the freedoms of choice in the US, they have the choice to choose to do what it takes to afford a decent house, or not. If they choose not, then don’t abdicate their irresponsibility by lowering the standards the rest of us HAVE to live by.
That’s where all this went wrong. It’s just that simple.
Ev on 09.28.2008
Yeah, that evil Jimmy Carter knew that this would ruin billionaires 30 years later.
This crisis was compounded by the derivitives market, not lending to minorities. It was deregulation and a failure to enforce banking laws that caused this in the last 8 years, not 30 years of programs to erase red lining.
Moonage on 09.28.2008
Jimmy Carter didn’t have a clue what his actions would lead to.
Derivatives may have compounded the issue, but it was the practice of loaning money to people who couldn’t pay for their loans and defaulted that broke their backs. If their equity ratios were proper in the first place, losing on the derivatives wouldn’t have been that big a deal.
Besides, I haven’t heard one single person call this the “derivative” bailout. Google reports about 90,700 finds for “housing bailout”, 32 for “derivative bailout”.
And, if derivatives were the only thing suffering, I doubt Congress would have been too concerned.
Jim Taylor on 09.28.2008
What about McCain’s campaign contributions?
I don’t quite understand why Fannie and Freddy contributions to Obama are being singled out here.
Merrill Lynch $298,413
Citigroup Inc $269,251
Morgan Stanley $233,272
Goldman Sachs $208,395
JPMorgan Chase & Co $179,975
AT&T Inc $174,487
Blank Rome LLP $150,426
Credit Suisse Group $150,025
Greenberg Traurig LLP $146,787
UBS AG $140,165
PricewaterhouseCoopers $140,120
US Government $137,617
Bank of America $129,475
Wachovia Corp $122,846
Lehman Brothers $117,500
FedEx Corp $113,453
Gibson, Dunn & Crutcher $104,250
US Army $103,613
Bear Stearns $99,300
Pinnacle West Capital $97,700
Moonage on 09.29.2008
Well, I was pointing out the fact that certain legislators who basically mandated that Fannie Mae and Freddie Mac loan to basically anyone that walked through the door and then Clinton appointees would take home millions in bonuses, and then when problems were discovered in 2005, opposed any efforts to reform Fannie and Freddie were the largest contributors to this problem. It wasn’t so much that they had contributed just to Obama, it was the list itself for the most part. In order to do the same for the other companies in trouble now, you’d still be reading the list.
And some people think it’s purely a Republican derivative thing.
When all this over, someone needs to investigate Barney Frank and Chriss Dodd in the worst possible way.
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Karl on 10.28.2009
John McCain is also a good politician and he got some good political ideology. i admire John McCain more than Obama.
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Dacnette on 11.17.2009
John McCain is my idol. He is a politician with a very strong personality.
Caramoan on 12.23.2009
Barack Obama is not only a charismatic president but he is a very intelligent and smart person too. I congratulate him for winning a Nobel Peace Prize .
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Moonage on 12.24.2009
He didn’t win it because he was intelligent AND smart. He won it because he’s real good at making promises.
Mark Capshaw on 03.01.2010
Barack Obama may be a charismatic leader but somehow his economic policies are not that great in my own opinion. But still i am thankful that a Obama is the current president of the unitied states.
Eric on 10.03.2011
Obummer is doing a great job helping the nation recover. NOT.
Class warfare
Racial Tensions
Highest jobless rates
inflation
no American consumer confidence
blames everyone else
believes abortion is the answer to all
GOOD job lemming for voting this dunce into office.
both sides suck