Too many local and national politicos try to rewrite political and business history to suit their ideological agendas. Even U.S. presidents do it.
The most recent blatant example of an attempt to rewrite past events was Bill Clinton’s recent pro-Obama speech saying that voting for Mitt Romney would bring the same brand of leadership “that got us into this (mortgage) trouble in the first place.”
Clinton’s attempts to throw the blame to others and to lie about his role in causing the mortgage meltdown and financial collapse of the housing market are despicable.
I lived through that fiasco, took notes as events unfolded, and collected key documents of what really happened, compared to Clinton’s current creative version of events. Here is the truth about what brought down the housing market:
The mortgage crisis of recent years was directly caused by federal government interference. An activist federal government started it all, by intervening in the free market process of making mortgage loans. The government forced lenders to loan mortgage money to low income borrowers, too many of whom defaulted on their loan obligations. This caused massive failures and defaults in the nationwide mortgage loan market. The result was a crisis for the housing markets as home values dipped below the remaining debt owed by borrowers on their mortgages.
How did it start? The problem was birthed by Jimmy Carter’s Community Reinvestment Act (CRA) in 1977. This mandated banks to provide credit for home mortgages to “underserved” populations. In 1992, the Democratic Congress passed the Federal Housing Enterprise Act, giving HUD authority to carry out Congress’ intent to give credit to home buyers with low incomes. The Clinton administration re-wrote the CRA Act in 1994 and instructed HUD Secretary Cisneros to “put it on steroids”, and juice it into overdrive. It “required the banks to lend to people who were poor credit risks in the name of ‘housing rights.’” This led to reckless surges in mortgage lending that years later pushed our financial system to the brink of chaos. At the same time, the Clinton administration pushed Fannie Mae to expand mortgage loans among low and moderate income people.
These new regulations destroyed credit standards in the national mortgage industry. The CRA was “used to force banks to subsidize poor communities with close to $1 trillion in high-risk loans”. By expanding this, Clinton was the key driver in creating the vast market for the same risky loans for which Obama now blames “greedy” and “predatory” banks.
During this same time, “A Chicago ‘public interest’ lawyer named Barack Obama was active in this movement.” He worked as a “community organizer” to loosen loan standards, and in 1992 ran a project for ACORN— yes, the same ACORN that later became disgraced for voter fraud.
All this is bad enough, but let’s get to the insidious part. Clinton changed the rules and imposed racial quotas and financial penalties on lenders, so that over 100 regulatory actions were filed against banks, which faced $10,000 fines per-loan-application if banks refused to loan to low income borrowers.
It got worse. Not many years later, the Comptroller of the Currency prosecuted 27 fair-lending cases against banks that refused to loan money to high-risk borrowers, resulting in more fines of tens of millions of dollars. As Thomas Sowell said, “It was the government that pressured financial institutions in general to lend to subprime borrowers, with…threats of legal action by then Attorney General Janet Reno if the feds did not like the statistics on who was getting loans and who wasn’t.”
So, Clinton’s fingerprints are all over the nation’s housing bust, which cost Americans trillions. His policies allowed unqualified people to be approved for home mortgages, and punished banks that refused to make loans. His appointees went to extreme lengths to pressure Fannie Mae to loosen credit requirements and promote “paper-thin” down payments by first-time home mortgage buyers with shaky financing and incomes. As Barron’s commented, “Bubbles don’t inflate themselves; they have friends in high places.”
To hear Clinton blame Republicans for the mortgage meltdown and housing bubble is the height of dishonesty and deceit.
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