Subprime Scandal: Newly released memos from the Clinton presidential library reveal evidence the government had a big hand in the housing crisis. The worst actors were in the White House, not on Wall Street. --During the 1990s, former Clinton aides bragged that more aggressive enforcement of the Community Reinvestment Act pressured banks to issue riskier mortgages, lending more proof the anti-redlining law fueled the crisis.
Read More at Investor's Business Daily
Read More......
Showing posts with label subprime mortgages. Show all posts
Showing posts with label subprime mortgages. Show all posts
Saturday, October 17, 2015
Thursday, January 22, 2015
Whistleblower: Pelosi Covered Up Role In Crisis
Subprime Scandal: We've long suspected the Financial Crisis Inquiry Commission wasn't honest in examining events before the meltdown. But an ex-commissioner says the probe was actually a full-blown political cover-up. In a just-released book, former FCIC member Peter Wallison says that a Democratic Congress worked with the commission's Democratic chairman to whitewash the government's central role in the mortgage debacle. The conspiracy helped protect some of the Democrats' biggest stars from scrutiny and accountability while helping justify the biggest government takeover of the financial sector since the New Deal.
Read more at the Investor's Business Daily Read More......
Read more at the Investor's Business Daily Read More......
Tuesday, September 4, 2012
Subprime Bubble: Obama 'Vampire Socialism' Built It
Housing Crisis: Previously unpublished court documents reveal that as a young lawyer from Chicago, President Obama's lawsuit against big banks started inflating the housing bubble that created the mess he says he inherited.
We have often written that the true roots of our current economic crisis lay in the excesses of the 1977 Community Reinvestment Act as redefined under the Clinton administration. We have explained how community outreach by banks, under pressure from groups such as Acorn, was transformed into the mandatory credit issuance based not of creditworthiness, but on the basis of "fairness."
"Redlining," the activists argued, was the antithesis of the American dream of owning a home. Moreover, they insisted, everyone had the "right" to own a home. So the banks were forced to issue loans to people who couldn't afford to pay them back. The banking system was forced to inflate a housing bubble that set us up for a near-catastrophic economic collapse.
This did not occur by accident, but by design at the hands of disciples of the Cloward-Piven strategy of overwhelming the system, causing it to collapse, then to be replaced by a worker's paradise of redistributed income with the individual totally subservient to the greater good.
Read more at Investor's Business Daily Read More......
We have often written that the true roots of our current economic crisis lay in the excesses of the 1977 Community Reinvestment Act as redefined under the Clinton administration. We have explained how community outreach by banks, under pressure from groups such as Acorn, was transformed into the mandatory credit issuance based not of creditworthiness, but on the basis of "fairness."
"Redlining," the activists argued, was the antithesis of the American dream of owning a home. Moreover, they insisted, everyone had the "right" to own a home. So the banks were forced to issue loans to people who couldn't afford to pay them back. The banking system was forced to inflate a housing bubble that set us up for a near-catastrophic economic collapse.
This did not occur by accident, but by design at the hands of disciples of the Cloward-Piven strategy of overwhelming the system, causing it to collapse, then to be replaced by a worker's paradise of redistributed income with the individual totally subservient to the greater good.
Read more at Investor's Business Daily Read More......
Monday, September 3, 2012
What Really Killed the Economy: Debunking the Claims of the ‘Blame Bush’ Democrats
By Herman Cain
September 3, 2012
You’re going to hear it all week out of Charlotte. The Democrats know that the economy is horrible, and there’s no way they can plausibly claim otherwise. So they’re going to spend three days telling us – in stump speeches and in media interviews – that you can’t blame Barack Obama because he inherited the whole mess. ✧ We know this routine all too well by now: It’s all Bush’s fault. ✧ Except that it’s not, and it never was.
One of the worst things about the mortgage market meltdown of 2008 is that so few people understood what really happened. Because it was complicated and hard to understand, people with ideological axes to grind tended to gravitate to whatever suited their preconceived point of view.
For Democrats, it was a poorly regulated Wall Street and fat cat bankers run wild. This was the easiest narrative to sell in 2008, when the public was tired of the Bush Administration and the media was only too happy to push the notion that Republicans had spent eight years letting free-market capitalism run wild at the expense of the little guy. So when Obama vowed to “crack down on Wall Street,” much of the public cheered him on.
Now that four years of Obama have not made things better, it only makes sense to ask: If his prescriptions did not solve the problem, did he correctly diagnose the problem in the first place? And the answer is no. He didn’t.
It’s also true, in fairness, that the government-caused-the-whole-thing explanation doesn’t wash either. It took a lot of cooks to make this horrible broth. But people who say banks were over-leveraged because of lax federal regulation are wrong. Banks had too much riding on toxic assets that would never have existed in the first place if government was not pushing so hard to make homeowners out of people who should not have been.
This was a bipartisan priority. The Clinton Administration passed the Community Reinvestment Act to make it easier for people with poor credit to qualify for mortgage loans. The Bush Administration – if you want to blame Bush for something – pushed hard on the idea that home ownership would turn directionless people into responsible citizens.
This helped lead to a boom in the housing market. Demand soared. Prices skyrocketed. And that caused a flood of capital into the market, as lenders searched high and low for buyers to lend money to. Why were they so eager to lend to anyone and everyone? Because the federal government eliminated much of the risk through Fannie Mae and Freddie Mac, which would buy up bundled mortgages as soon as the ink was dry on the closing papers.
Simply put, the more you could lend, the more quick money you could make – and that gave rise to the subprime mortgage industry, which would approve people with terrible credit and no money for a down payment. The interest rates on these loans were obscene, but it wasn’t hard to get people without good credit history to make a bad decision and sign off on the mortgages. To them, it was like Christmas. They’d never been able to qualify for anything before, and suddenly they had a house.
It got worse. As the assessed value of homes soared, lenders offered home equity loans against the theoretical value of people’s homes. Someone who bought a house in 1999 for $150,000 using a traditional mortgage was getting a phone call in 2005 from Super Slick Loans and being told their house was now worth $200,000 – and oh by the way, would they like a $50,000 home equity loan? So lots of people took on more debt, all against the theoretical value of their homes. Once the housing market tanked, and their home values returned to their real, pre-bubble value, they were stuck with the debt and underwater on their mortgages.
With all these bad loans on the books, the financial system neared a breaking point and was on the verge of collapse when the Bush Administration stepped in with $700 billion in the form of the Trouble Asset Relief Program to shore up the system. Everyone hated it, but Bush had to choose between the bailout and letting the nation’s financial system collapse.
And yet, even with TARP, massive damage was unavoidable and the nation’s economy went into a nosedive, with negative growth of more than 6 percent in the fourth quarter of 2008. It was a complete economic disaster.
Many dumb practices and policies led to this, but few were as egregious as the role of Fannie Mae and Freddie Mac. The Bush Administration saw this coming in 2003 and pushed to reform Fannie’s and Freddie’s practices, but they were stymied in Congress – primarily by Democrats Christopher Dodd in the Senate and Barney Frank in the House, who both insisted there was nothing wrong with what Fannie and Freddie were doing.
Did deregulation of financial institutions cause this? No. The idea that Republicans under Bush deregulated like mad is pure fiction. I wish it were the truth! We would all have been a lot better off. The mortgage market collapsed because it was built on a house of cards to begin with, and that house of cards exploited a lot of poor people by encouraging them to take on debt they were not prepared to handle. A lot of them spent thousands on mortgage payments only to lose their homes in the end because they could not afford their obligations. They ended up with no equity whatsoever. These folks would have been better off living in apartments and paying rent that fit within their budgets.
Perhaps the cruelest irony of all is that the federal government responded to this with an act that tightened the screws on banks – introducing all kinds of new requirements and regulations that did nothing to make things better. And what was this new act called? Dodd-Frank. That’s right. The two Democrats who prevented the reform of Fannie and Freddie back in 2003 got to write the big new law that has predictably made things worse, and even got to put their names on it.
Welcome to Washington.
Unsurprisingly, the Obama Administration’s policies have not made things better – in part because Obama has doubled down on the dumb idea of prosperity through debt. Not only has he exploded the federal government’s debt, he continues pushing banks to lend lavishly, encourages students to take on massive education loans (student loan debt is quickly approaching $1 trillion; there’s your next big financial crisis) and pushes the Federal Reserve to keep interest rates artificially low so credit will be easy.
And for people facing foreclosure on homes they never should have purchased in the first place, Obama pressures banks to keep them in the homes. What do you think that’s going to do? It’s going to keep these folks under financial strain while saddling the banks with more high-risk loans – the very thing that led the mortgage market to collapse in 2008. The people would be better off finding more affordable accommodations. The banks would be better off cutting their losses and re-selling the homes at realistic prices to more stable buyers. But none of this will happen because Obama refuses to let the market work as it should.
This is what really happened. The Blame Bush narrative we are sure to hear in Charlotte is a predictable attempt to mask the real reasons for the meltdown, and to hide the reality of Obama’s failures in dealing with the problem. He has made things worse – not better – because he never understood what happened in the first place and still doesn’t.
Too much capitalism was not the problem. Too little economic rationality was the problem, and that has only gotten worse under the most economically irrational president this nation has ever had. Read More......
September 3, 2012
You’re going to hear it all week out of Charlotte. The Democrats know that the economy is horrible, and there’s no way they can plausibly claim otherwise. So they’re going to spend three days telling us – in stump speeches and in media interviews – that you can’t blame Barack Obama because he inherited the whole mess. ✧ We know this routine all too well by now: It’s all Bush’s fault. ✧ Except that it’s not, and it never was.
One of the worst things about the mortgage market meltdown of 2008 is that so few people understood what really happened. Because it was complicated and hard to understand, people with ideological axes to grind tended to gravitate to whatever suited their preconceived point of view.
For Democrats, it was a poorly regulated Wall Street and fat cat bankers run wild. This was the easiest narrative to sell in 2008, when the public was tired of the Bush Administration and the media was only too happy to push the notion that Republicans had spent eight years letting free-market capitalism run wild at the expense of the little guy. So when Obama vowed to “crack down on Wall Street,” much of the public cheered him on.
Now that four years of Obama have not made things better, it only makes sense to ask: If his prescriptions did not solve the problem, did he correctly diagnose the problem in the first place? And the answer is no. He didn’t.
It’s also true, in fairness, that the government-caused-the-whole-thing explanation doesn’t wash either. It took a lot of cooks to make this horrible broth. But people who say banks were over-leveraged because of lax federal regulation are wrong. Banks had too much riding on toxic assets that would never have existed in the first place if government was not pushing so hard to make homeowners out of people who should not have been.
This was a bipartisan priority. The Clinton Administration passed the Community Reinvestment Act to make it easier for people with poor credit to qualify for mortgage loans. The Bush Administration – if you want to blame Bush for something – pushed hard on the idea that home ownership would turn directionless people into responsible citizens.
This helped lead to a boom in the housing market. Demand soared. Prices skyrocketed. And that caused a flood of capital into the market, as lenders searched high and low for buyers to lend money to. Why were they so eager to lend to anyone and everyone? Because the federal government eliminated much of the risk through Fannie Mae and Freddie Mac, which would buy up bundled mortgages as soon as the ink was dry on the closing papers.
Simply put, the more you could lend, the more quick money you could make – and that gave rise to the subprime mortgage industry, which would approve people with terrible credit and no money for a down payment. The interest rates on these loans were obscene, but it wasn’t hard to get people without good credit history to make a bad decision and sign off on the mortgages. To them, it was like Christmas. They’d never been able to qualify for anything before, and suddenly they had a house.
It got worse. As the assessed value of homes soared, lenders offered home equity loans against the theoretical value of people’s homes. Someone who bought a house in 1999 for $150,000 using a traditional mortgage was getting a phone call in 2005 from Super Slick Loans and being told their house was now worth $200,000 – and oh by the way, would they like a $50,000 home equity loan? So lots of people took on more debt, all against the theoretical value of their homes. Once the housing market tanked, and their home values returned to their real, pre-bubble value, they were stuck with the debt and underwater on their mortgages.
With all these bad loans on the books, the financial system neared a breaking point and was on the verge of collapse when the Bush Administration stepped in with $700 billion in the form of the Trouble Asset Relief Program to shore up the system. Everyone hated it, but Bush had to choose between the bailout and letting the nation’s financial system collapse.
And yet, even with TARP, massive damage was unavoidable and the nation’s economy went into a nosedive, with negative growth of more than 6 percent in the fourth quarter of 2008. It was a complete economic disaster.
Many dumb practices and policies led to this, but few were as egregious as the role of Fannie Mae and Freddie Mac. The Bush Administration saw this coming in 2003 and pushed to reform Fannie’s and Freddie’s practices, but they were stymied in Congress – primarily by Democrats Christopher Dodd in the Senate and Barney Frank in the House, who both insisted there was nothing wrong with what Fannie and Freddie were doing.
Did deregulation of financial institutions cause this? No. The idea that Republicans under Bush deregulated like mad is pure fiction. I wish it were the truth! We would all have been a lot better off. The mortgage market collapsed because it was built on a house of cards to begin with, and that house of cards exploited a lot of poor people by encouraging them to take on debt they were not prepared to handle. A lot of them spent thousands on mortgage payments only to lose their homes in the end because they could not afford their obligations. They ended up with no equity whatsoever. These folks would have been better off living in apartments and paying rent that fit within their budgets.
Perhaps the cruelest irony of all is that the federal government responded to this with an act that tightened the screws on banks – introducing all kinds of new requirements and regulations that did nothing to make things better. And what was this new act called? Dodd-Frank. That’s right. The two Democrats who prevented the reform of Fannie and Freddie back in 2003 got to write the big new law that has predictably made things worse, and even got to put their names on it.
Welcome to Washington.
Unsurprisingly, the Obama Administration’s policies have not made things better – in part because Obama has doubled down on the dumb idea of prosperity through debt. Not only has he exploded the federal government’s debt, he continues pushing banks to lend lavishly, encourages students to take on massive education loans (student loan debt is quickly approaching $1 trillion; there’s your next big financial crisis) and pushes the Federal Reserve to keep interest rates artificially low so credit will be easy.
And for people facing foreclosure on homes they never should have purchased in the first place, Obama pressures banks to keep them in the homes. What do you think that’s going to do? It’s going to keep these folks under financial strain while saddling the banks with more high-risk loans – the very thing that led the mortgage market to collapse in 2008. The people would be better off finding more affordable accommodations. The banks would be better off cutting their losses and re-selling the homes at realistic prices to more stable buyers. But none of this will happen because Obama refuses to let the market work as it should.
This is what really happened. The Blame Bush narrative we are sure to hear in Charlotte is a predictable attempt to mask the real reasons for the meltdown, and to hide the reality of Obama’s failures in dealing with the problem. He has made things worse – not better – because he never understood what happened in the first place and still doesn’t.
Too much capitalism was not the problem. Too little economic rationality was the problem, and that has only gotten worse under the most economically irrational president this nation has ever had. Read More......
Wednesday, September 24, 2008
Bank bust - Who's to blame?
Last Monday, Jean Nelson spoke at the Benton County Republican Women’s meeting about the banking crisis and how it came about. Her talk was like deja vous. Just days before, Glenn Beck had described how the debacle began. This is important information to remember when you hear Congress, the President, Bill O'Reilly, and others refer to Wall Street greed as the cause of our collapsing financial institutions. Here is the transcript of that radio broadcast [may be a little over the top in spots] plus additional links to pertinent articles from the 1990's.
Glenn Beck, September 18, 2008
GLENN: Today I want to lay the case out to you, because we have to know what happened to the economy. You have to know that they are printing money as we speak at the Treasury. You have to know what you know and know who caused it, how did it start, and you've got to bring yourself up to speed rapidly to be able to share with your friends the truth so they know how to make a decision on which one of these candidates, if either of them, was responsible. Which one of these candidates can help us get out of the mess.
Yesterday Barack Obama said, and I quote: Senator McCain bragged about how as chairman of the commerce committee in the Senate he had oversight of every part of the economy. Well, I can say to Senator McCain, nice job, nice job. He was in Vegas and he said, quote: I will crack down on predatory lenders, the all too often target the African American community, the one that targets the Hispanic community with tough new penalties that treat mortgage fraud like the crime that it is. And the crowd went wild.
It is important that you hear, "I will crack down on predatory lenders." Have you heard that before? The people that often target the African American community, target the Hispanic community with tough new penalties. Got it? Okay.
Today I'm going to lay out the case for you in the next 10 minutes and I think you're going to understand who is responsible for this credit crunch and this credit crisis, and you ain't gonna like the answer, but this I believe is a big part of the answer. The Community Reinvestment Act. It was started, it was a "Feel good" measure back in the 1970s and Jimmy Carter started it, "We've got to invest in our communities again." Well, in 1992 Boston's Federal Reserve did a study. They funded this study and in this study they found subtle racism in the banking system, discrimination in lending. This is again from the Boston race study, discrimination in lending. There were a couple of things in there that were stark. For instance, they showed a white guy and a black guy. Both went in to buy a house for $60,000. The black man didn't get the loan even though his assets, his net worth was stated as $10 million. The bank didn't give a $60,000 loan to a guy who had $10 million in assets. How did that happen other than you didn't want to lend to a black man. Well, the Fed used this study and they brought it to congress and congress just latched onto this thing. Unfortunately within just a couple of months, another group, another university came in and looked at this study and said, wait, wait, wait, wait, wait, we've looked at the raw data; these are mistakes in here. First of all, the analysis is wrong, but the facts are wrong. In the one that everybody was using, the black guy with the $10 million in assets that didn't get a loan, it wasn't $10 million. When you looked at the raw data, it was $1,000. He had $1,000 in assets. So the subtle proof that was left to stand, because nobody went back and revised it. Nobody went back and said, oh, well, okay, we have to throw this study out because it is so wrong. They just let the subtle proof, and here was the subtle proof.
The discrimination in lending, see if any of these sound familiar in 1992. Discrimination in lending was that banks wouldn't make loans in low income areas. So if you were in Detroit and you had a house that was selling for $100,000 last year and is now worth $10,000, the banks were like, no, we're not going to loan anybody any money; it's a bad section of town. The other subtle proof, banks had minimum lending requirements. So in other words, they could say we only lend $10,000 because there's no money in it for us at $2,000. We only lend 20 because there's no money in $10,000. That was racism. The application fee was racist. The fact that you had to actually say "Could you verify your income" was racist. That was 1992.
In 1992 again they wanted to revise the Community Reinvestment Act and they wanted to put in all of these penalties if you were being racist. Now, under the CRA, the banks had to convince a set of bureaucracies that they weren't engaging in discrimination, and the discrimination could be called by anybody. You could just raise your hand and say they're discriminating. ACORN was a big one that said discrimination. But again what counted as discrimination after 1992, arbitrary or outdated criteria. That outdated or arbitrary criteria income level, income verification, credit history and savings history. Do any of those things sound familiar? So to satisfy the demands of what now had been passed into law, lenders developed a sub prime mortgage. Didn't have sub prime before. That way potential borrowers who couldn't qualify for the 30 year traditional fixed mortgage had a way, so the bank wasn't being racist. In 1994 less than 5% of mortgage were sub prime. By 2006 20% of new mortgages were sub prime. Politicians and the Fed, they were excited about this, this is fantastic. It's a new mortgage that puts families in homes, gives them a piece of the American dream. How many times did you hear people say that? In 1994 Janet Reno said the Justice Department was going to go after banks that were racists. They said today's actions demonstrate we will attack lending discrimination wherever it is and whatever form it appears. No loan is exempt. No bank is immune. For those who thumb their nose at us, I promise vigorous enforcement [Emphasis added]. Sounds a little like Barack Obama today. Just so you know, there were no fines. You didn't even have to report this information to the government, but here's what happened. If you didn't, you were called racist. That's your fine. You were called a racist bank. If you wanted to open a branch, if ACORN decided to come against you, they would protest your opening up of a branch in that area and they would say you were a racist lender. If you wanted to do a merger, you couldn't do a merger because you hadn't played ball. You hadn't done the low interest rate, the mortgage with no income verification. Those in Washington stood in your way on any business you wanted to do.
Why do you think when J.P. Morgan and Chase teamed up, when they merged together, why do you think the first thing they did when they announced that merger was to make a gigantic donation to ACORN? It was extortion. Everybody was excited about this. Alan Greenspan came out in support of the mortgage options. He said Americans, consumers I'm quoting might benefit if lenders provided greater mortgage product alternatives to the traditional fixed rate mortgages. The chairman and CEO of Freddie Mac made affordable housing a priority and created new mortgage products that allowed for lower down payments. This was in 2004. Ten years, ten years after they enacted all of these laws to make sure that nobody was being discriminatory.
President Bush in 2004 launched his down payment initiative which provided assistance to low income families to help them with their initial down payment, which was quickly followed by his zero down payment initiative which eliminated the requirement of a minimum 3% down payment for FHA insured single family mortgages. If you were a first time buyer, zero down. In 2005 Barack Obama said it's not good enough that the real estate market is prospering for some. Everyone has to be able to get affordable housing.
Barney Frank said no one wants to be called out for racism by opposing any of these requirements. In 2007 Barney Frank went on to say the data showing serious housing discrimination in the granting of mortgages in Boston is very troubling. The serious housing discrimination in Boston is troubling and must be addressed. Same year, Senator Chris Dodd proudly took credit for helping pass a revised Community Reinvestment Act with the help of Reverend Jesse Jackson. Earlier this year Senator John McCain responded to a question by Larry Kudlow. He said, "Absolutely there were people that predicted that the Community Reinvestment Act might lead to reckless and unsound lending practices just short of a fill in the amount of I don't like to use the word quota, but certain percentages of a home of the bank's lending practices, it has to be reexamined. It has to be judged by its effect. We need to find out how this particular system affected the overall insolvency of the subprime lending issue and I think I'm not saying it needs to be repealed but it certainly needs to be examined and what its effects have been and we'll be able to figure that out. Really. As Nancy Pelosi says, along with Harry Reid, that we need to create yet another government agency to handle these situations. That we need another federal agency now to help bail out the people that got these loans because there wasn't any oversight. I contend it was the politicians that pushed people into this situation. It was the politicians that made this possible, and it was not just the Democrats. It was the Republicans as well.
Additional Articles:
National Review, Nov 21, 1994 by Ed Rubenstein - Banking on Racism
New York Times, May 10, 1996 by by Peter Passell - Race, Mortgages and Statistics; The Unending Debate Over a Study of Lending Bias
The Editorial Times, CA, September 24, 2008 - Flashback 1993: Assault on the mortgage lenders: in the name of racial justice... [from National Review - Article, December 27, 1993]
Glenn Beck, September 18, 2008
GLENN: Today I want to lay the case out to you, because we have to know what happened to the economy. You have to know that they are printing money as we speak at the Treasury. You have to know what you know and know who caused it, how did it start, and you've got to bring yourself up to speed rapidly to be able to share with your friends the truth so they know how to make a decision on which one of these candidates, if either of them, was responsible. Which one of these candidates can help us get out of the mess.
Yesterday Barack Obama said, and I quote: Senator McCain bragged about how as chairman of the commerce committee in the Senate he had oversight of every part of the economy. Well, I can say to Senator McCain, nice job, nice job. He was in Vegas and he said, quote: I will crack down on predatory lenders, the all too often target the African American community, the one that targets the Hispanic community with tough new penalties that treat mortgage fraud like the crime that it is. And the crowd went wild.
It is important that you hear, "I will crack down on predatory lenders." Have you heard that before? The people that often target the African American community, target the Hispanic community with tough new penalties. Got it? Okay.
Today I'm going to lay out the case for you in the next 10 minutes and I think you're going to understand who is responsible for this credit crunch and this credit crisis, and you ain't gonna like the answer, but this I believe is a big part of the answer. The Community Reinvestment Act. It was started, it was a "Feel good" measure back in the 1970s and Jimmy Carter started it, "We've got to invest in our communities again." Well, in 1992 Boston's Federal Reserve did a study. They funded this study and in this study they found subtle racism in the banking system, discrimination in lending. This is again from the Boston race study, discrimination in lending. There were a couple of things in there that were stark. For instance, they showed a white guy and a black guy. Both went in to buy a house for $60,000. The black man didn't get the loan even though his assets, his net worth was stated as $10 million. The bank didn't give a $60,000 loan to a guy who had $10 million in assets. How did that happen other than you didn't want to lend to a black man. Well, the Fed used this study and they brought it to congress and congress just latched onto this thing. Unfortunately within just a couple of months, another group, another university came in and looked at this study and said, wait, wait, wait, wait, wait, we've looked at the raw data; these are mistakes in here. First of all, the analysis is wrong, but the facts are wrong. In the one that everybody was using, the black guy with the $10 million in assets that didn't get a loan, it wasn't $10 million. When you looked at the raw data, it was $1,000. He had $1,000 in assets. So the subtle proof that was left to stand, because nobody went back and revised it. Nobody went back and said, oh, well, okay, we have to throw this study out because it is so wrong. They just let the subtle proof, and here was the subtle proof.
The discrimination in lending, see if any of these sound familiar in 1992. Discrimination in lending was that banks wouldn't make loans in low income areas. So if you were in Detroit and you had a house that was selling for $100,000 last year and is now worth $10,000, the banks were like, no, we're not going to loan anybody any money; it's a bad section of town. The other subtle proof, banks had minimum lending requirements. So in other words, they could say we only lend $10,000 because there's no money in it for us at $2,000. We only lend 20 because there's no money in $10,000. That was racism. The application fee was racist. The fact that you had to actually say "Could you verify your income" was racist. That was 1992.
In 1992 again they wanted to revise the Community Reinvestment Act and they wanted to put in all of these penalties if you were being racist. Now, under the CRA, the banks had to convince a set of bureaucracies that they weren't engaging in discrimination, and the discrimination could be called by anybody. You could just raise your hand and say they're discriminating. ACORN was a big one that said discrimination. But again what counted as discrimination after 1992, arbitrary or outdated criteria. That outdated or arbitrary criteria income level, income verification, credit history and savings history. Do any of those things sound familiar? So to satisfy the demands of what now had been passed into law, lenders developed a sub prime mortgage. Didn't have sub prime before. That way potential borrowers who couldn't qualify for the 30 year traditional fixed mortgage had a way, so the bank wasn't being racist. In 1994 less than 5% of mortgage were sub prime. By 2006 20% of new mortgages were sub prime. Politicians and the Fed, they were excited about this, this is fantastic. It's a new mortgage that puts families in homes, gives them a piece of the American dream. How many times did you hear people say that? In 1994 Janet Reno said the Justice Department was going to go after banks that were racists. They said today's actions demonstrate we will attack lending discrimination wherever it is and whatever form it appears. No loan is exempt. No bank is immune. For those who thumb their nose at us, I promise vigorous enforcement [Emphasis added]. Sounds a little like Barack Obama today. Just so you know, there were no fines. You didn't even have to report this information to the government, but here's what happened. If you didn't, you were called racist. That's your fine. You were called a racist bank. If you wanted to open a branch, if ACORN decided to come against you, they would protest your opening up of a branch in that area and they would say you were a racist lender. If you wanted to do a merger, you couldn't do a merger because you hadn't played ball. You hadn't done the low interest rate, the mortgage with no income verification. Those in Washington stood in your way on any business you wanted to do.
Why do you think when J.P. Morgan and Chase teamed up, when they merged together, why do you think the first thing they did when they announced that merger was to make a gigantic donation to ACORN? It was extortion. Everybody was excited about this. Alan Greenspan came out in support of the mortgage options. He said Americans, consumers I'm quoting might benefit if lenders provided greater mortgage product alternatives to the traditional fixed rate mortgages. The chairman and CEO of Freddie Mac made affordable housing a priority and created new mortgage products that allowed for lower down payments. This was in 2004. Ten years, ten years after they enacted all of these laws to make sure that nobody was being discriminatory.
President Bush in 2004 launched his down payment initiative which provided assistance to low income families to help them with their initial down payment, which was quickly followed by his zero down payment initiative which eliminated the requirement of a minimum 3% down payment for FHA insured single family mortgages. If you were a first time buyer, zero down. In 2005 Barack Obama said it's not good enough that the real estate market is prospering for some. Everyone has to be able to get affordable housing.
Barney Frank said no one wants to be called out for racism by opposing any of these requirements. In 2007 Barney Frank went on to say the data showing serious housing discrimination in the granting of mortgages in Boston is very troubling. The serious housing discrimination in Boston is troubling and must be addressed. Same year, Senator Chris Dodd proudly took credit for helping pass a revised Community Reinvestment Act with the help of Reverend Jesse Jackson. Earlier this year Senator John McCain responded to a question by Larry Kudlow. He said, "Absolutely there were people that predicted that the Community Reinvestment Act might lead to reckless and unsound lending practices just short of a fill in the amount of I don't like to use the word quota, but certain percentages of a home of the bank's lending practices, it has to be reexamined. It has to be judged by its effect. We need to find out how this particular system affected the overall insolvency of the subprime lending issue and I think I'm not saying it needs to be repealed but it certainly needs to be examined and what its effects have been and we'll be able to figure that out. Really. As Nancy Pelosi says, along with Harry Reid, that we need to create yet another government agency to handle these situations. That we need another federal agency now to help bail out the people that got these loans because there wasn't any oversight. I contend it was the politicians that pushed people into this situation. It was the politicians that made this possible, and it was not just the Democrats. It was the Republicans as well.
Additional Articles:
National Review, Nov 21, 1994 by Ed Rubenstein - Banking on Racism
New York Times, May 10, 1996 by by Peter Passell - Race, Mortgages and Statistics; The Unending Debate Over a Study of Lending Bias
The Editorial Times, CA, September 24, 2008 - Flashback 1993: Assault on the mortgage lenders: in the name of racial justice... [from National Review - Article, December 27, 1993]
Read More......
Assault on the mortgage lenders: in the name of racial justice, the Clintonites want the power to decide who gets a home of his own - efforts to impose regulations on banks to make loans even if applicants are not creditworthy.
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