Financial Crisis-- Who Dunit?

(The following is an excerpt from Gary Bauer's, "End of Day.")
And what exactly set off this current round of financial chaos? Major speculation in the housing market – which can be traced back to economic policies mandated by Jimmy Carter and Bill Clinton, policies that George Bush and John McCain tried to correct in 2003 and 2005. Investors Business Daily offers an excellent analysis which you can read here. But here are a few excerpts:

"To hear today's Democrats, you'd think all this started in the last couple years. But the crisis began much earlier. 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. …

"Lenders who refused would find themselves castigated publicly as racists. As noted this week in an IBD editorial, no fewer than four federal bank regulators scrutinized financial firms' books to make sure they were in compliance. Failure to comply meant your bank might not be allowed to expand lending, add new branches or merge with other companies. Banks were given a so-called 'CRA rating' that graded how diverse their lending portfolio was. It was economic hardball. …

"In the name of diversity, banks began making huge numbers of loans that they previously would not have. They opened branches in poor areas to lift their CRA ratings. Meanwhile, Congress gave Fannie and Freddie the go-ahead to finance it all by buying loans from banks, then repackaging and securitizing them for resale on the open market. That's how the contagion began. …

"As they grew, Fannie and Freddie grew heavily involved in 'community development,' giving money to local housing rights groups and 'empowering' the groups, such as ACORN, for whom Barack Obama once worked in Chicago. Warning signals were everywhere. Yet at every turn, Democrats in Congress halted attempts to stop the madness. It happened in 1992, again in 2000, in 2003 and in 2005. It may happen this year, too. …

"The Clinton White House used Fannie and Freddie as a patronage job bank. Former executives and board members read like a who's who of the Clinton-era Democratic Party, including Franklin Raines, Jamie Gorelick, Jim Johnson and current Rep. Rahm Emanuel.

"Collectively, they and others made well more than $100 million from Fannie and Freddie, whose books were cooked Enron-style during the late 1990s and early 2000s to ensure executives got their massive bonuses. They got the bonuses. You get the bill."




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