The Community Reinvestment Act is to blame for the financial crisis, but it so powerfully serves Democrats' interests that they'll do anything to protect it — including revising history.It's amusing then that a rule Clinton "viciously enforced" in 1994 caused housing prices to collapse in 2006...12 years later.
The CRA coerces banks into making loans based on political correctness, and little else, to people who can't afford them. Enforced like never before by the Clinton administration, the regulation destroyed credit standards across the mortgage industry, created the subprime market, and caused the housing bubble that has now burst and left us with the worst housing and banking crises since the Great Depression.
The CRA should be abolished, along with the government-sponsored enterprises that fueled the secondary market for subprimes — under pressure from Clinton, who ordered HUD to set quotas for "affirmative action" lending at Fannie Mae and Freddie Mac.
But powerful Democrats in Washington want to protect the act — along with Fannie and Freddie — and spin the subprime scandal as the result of too little regulation, not too much.
"Repealing or weakening the CRA would be a mistake," warns Senate Banking Committee Chairman Chris Dodd, D-Conn., who argues that the CRA should be strengthened.
Dodd, the top recipient of Fannie donations and himself a beneficiary of a sweetheart mortgage brokered by a subprime lender, recently invited one of Clinton's top enforcers of the CRA to testify.
"The notion that CRA has caused this problem is a pernicious thought," said former Comptroller of the Currency Gene Ludwig. "These are not truthful statements. The CRA has helped to create a better and sounder world for finance, not the opposite."
Dead wrong. But the mainstream media believe it, and have attacked those, including this paper, who dare to tell the truth about the crisis. Already the debacle has erased $13 trillion in wealth, while putting taxpayers on the hook for up to $8 trillion in bailouts.
Dirt cheap credit after Alan Greenspan cut interest rates to one percent in 2004 and 2005, massive bank and investment house mergers after Gramm-Leach-Bliley was passed in 1999, a torrent of greed in the financial sector and a stock market forming an unsustainable bubble economy due to even fewer regulations in turning subprime loans into securities all of course had nothing to do with it. Banks became greedy and played the markets, riding a huge bubble elevator on the way up that had nowhere to go but down this year.
So much of the financial sector's assets are now tied up in "off-balance sheet investment vehicles" that the banks themselves are largely insolvent. They all played the game. They all lost. They are now all being bailed out.
But gosh, it sure is fun to blame Democrats, poor black folk, and the Community Reinvestment Act for the crisis, and to rewrite history and pretend banksters were all forced to make billions in bad loans to people they knew that were broke instead of admitting a huge pecentage of folks given loans under the CFA -- minorities -- were in fact in much better financial shape than the average subprime borrower.
The article finishes up with facts that supposedly damn Clinton and poor ass negroes as the cause of wiping out $20 trillion of American wealth, facts like "Nearly 4 in 10 subprime loans between 2004 and 2007 were made by CRA-covered banks such as Washington Mutual and IndyMac. And that doesn't include loans made by subprime lenders owned by banks, which were in effect covered by the CRA."
Of course that leaves out the fact that these large mortgage lenders were covered under CRA because they were large mortgage lenders in the first place and being large lenders they made lots of subprime loans in order to make money and then bundle the risk into securitized vehicles, putting them off the balance sheets.
It's pretty idiotic, and any serious person rejects the argument that the CRA forced the banks into making loans they couldn't pay...including the lenders themselves.
But IBD plunges on into the darkness, admitting that even though Countrywide, the largest single subprime lender in America, was not covered under the CRA, it still "came under great pressure to loan to minorities".
No, it came under the pressure of its own greed.
And let's not forget banks like Citigroup that didn't make subprime loans at all, but still collapsed under the weight of their own bad investments they made by choice and had to be rescued with our money.
But IBD and their wingnut buddies keep digging that hole and keep screaming into the abyss that those damn Democrats forced the good Christian Republican God-Fearing white banks of America to loan to the damn negroes who wrecked our country by being too poor to pay the banks trying to fleece them.
There's a lot of blame to go around, but this is like blaming purse-snatchers and bad cooks who start grease fires in New York City for being numerous enough to require all those cops and firefighters to be around when they got the call on September 11, 2001, and then saying the bad cooks and purse-snatchers are the ones who really killed these brave heroes.
Does anyone actually believe the CRA caused $20 trillion in damage to the economy, and not greed, deregulation, and easy credit bubbles?