The LA Times blames Bill Clinton for the economic crisis. No, really. It does. Of course, when they printed this article in 1999, they were bragging about it.
Under Clinton, bank regulators have breathed the first real life into enforcement of the Community Reinvestment Act, a 20-year-old statute meant to combat “redlining” by requiring banks to serve their low-income communities. The administration also has sent a clear message by stiffening enforcement of the fair housing and fair lending laws. The bottom line: Between 1993 and 1997, home loans grew by 72% to blacks and by 45% to Latinos, far faster than the total growth rate.
Lenders also have opened the door wider to minorities because of new initiatives at Fannie Mae and Freddie Mac–the giant federally chartered corporations that play critical, if obscure, roles in the home finance system. Fannie Mae and Freddie Mac buy mortgages from lenders and bundle them into securities; that provides lenders the funds to lend more.
In 1992, Congress mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains. It has aimed extensive advertising campaigns at minorities that explain how to buy a home and opened three dozen local offices to encourage lenders to serve these markets. Most importantly, Fannie Mae has agreed to buy more loans with very low down payments–or with mortgage payments that represent an unusually high percentage of a buyer’s income. That’s made banks willing to lend to lower-income families they once might have rejected.
But for all that progress, the black and Latino homeownership rates, at about 46%, still significantly trail the white rate, which is nearing 73%. Much of that difference represents structural social disparities–in education levels, wealth and the percentage of single-parent families–that will only change slowly. Still, Apgar says, HUD’s analysis suggests there are enough qualified buyers to move the minority homeownership rate into the mid-50% range.
… But with discrimination in the banking system not yet eradicated, maintaining the momentum of the 1990s will also require a continuing nudge from Washington. One key is to defend the Community Reinvestment Act, which the Senate shortsightedly voted to retrench recently. Clinton has threatened a veto if the House concurs.
The top priority may be to ask more of Fannie Mae and Freddie Mac. The two companies are now required to devote 42% of their portfolios to loans for low- and moderate-income borrowers; HUD, which has the authority to set the targets, is poised to propose an increase this summer. Although Fannie Mae actually has exceeded its target since 1994, it is resisting any hike. It argues that a higher target would only produce more loan defaults by pressuring banks to accept unsafe borrowers. HUD says Fannie Mae is resisting more low-income loans because they are less profitable.
Barry Zigas, who heads Fannie Mae’s low-income efforts, is undoubtedly correct when he argues, “There is obviously a limit beyond which [we] can’t push [the banks] to produce.” But with the housing market still sizzling, minority unemployment down and Fannie Mae enjoying record profits (over $3.4 billion last year), it doesn’t appear that the limit has been reached.
How about now? Has it been reached yet?
This crisis is directly related to the leftist concept of equality of outcome, rather than equality of opportunity. Every person in this country has the opportunity to buy a home – just as soon as they meet the criteria. Instead, they relaxed that criteria to artificially generate a social outcome. If the goal was higher minority home ownership, why not provide financial management classes, encourage savings, and job skills training? And the worst part of all this – as evidenced by Barney Frank’s recent statements – is they haven’t learned a thing. Not only would they do it again, they intend to do so as part of the “bailout.”
Ed Morrissey summarizes it at Hot Air-
I’ve written this a couple of times, but this LA Times article from 1999 makes the case clearly — and maybe even more credibly, since it praises all of the stupidity and government intervention that created the bubble and the collapse. Clearly, this was not the fault of a free market out of control. Congress and the executive created this problem by extorting banks into poorly-considered lending practices under the threat of prosecution as “unfair lenders”. They compounded that extortion with an artificial mechanism to incentivize lenders by having GSEs buy the paper and resell it, with government imprimatur as its guarantee.
And here’s a newsflash to Annoying Blowhard – yes, Bush was wrong, as were the Republicans, as I said. But Rush – oh, excuse me, “big cigars… private jet… right wing… radio hosts” next time just SAY “Rush Limbaugh and be done with it, you idiot – wasn’t “misleading” anyone or lying by blaming Clinton for this. As usual, Annoying Blowhard thinks that blaming everyone equally means he’s a)correct and b)fair. It’s as morally vacuous as treating equality of outcome the same as equality of opportunity. The GOP can fairly be blamed for not fixing this crisis, it’s true. And the Democrats can be blamed for engineering it in the first place.
h/t to SeeJaneMom, who writes -
Legacy building with a Ponzi scheme strong armed by Janet Reno brought to you by Liberals defining “affordable housing” as homeownership to unqualified buyers, underwritten by you and me, fellow taxpayer.
THANK YOU VERY VERY MUCH for the proper hat tip.
I know Ed is busy, AND HE IS A GREAT FRIEND….but I swear…the things that get “stolen” from us little guys conspire to KEEP us little.
I know I don’t OWN the news, but honestly, I work HARD for the links that are MY OWN.
Thank you again.
I hope you are buying gold like its cool, and moving to the country so we can live like Olivia Walton here soon…because it IS coming.
My pleasure.
The economic meltdown is a direct result of right-wing cult-like obedience to the fantasy of a “free-market” which has never existed except in fantasy-land.
The Republicans cult of “deregulation” created the anarchy that spun out of control and has seriously damaged America’s ability to claim being THE financial super-power.
Regulations that were stripped over the last 28 years of conservatism (and that includes Clinton) are entirely responsible for edging this country close to a second Republican engineered Great Depression.
And now to prevent, or at least forestall until after the election, the financial collapse, REPUBLICANS ARE TURNING TO GOVERNMENT TO BAIL THEM OUT.
Congratulations, you’ve been slavishly following a Communist Repulic(an Bush) leader who’s nationalized businesses and expects everyone to cough up cash to bail out his buddies.
Fannie has no part in this crisis because it is prohibited from buying “non-conforming” loans (subprime loans). Freddie has about $180 billion in Alt-A and subprime loans, so the total bailout for Freddie would be less than that. On the other hand, IndyMac, Countrywide, Lehman, Citigroup, Merrill, Bear Sterns, actively made and sold subprime crap.
It’s interesting that this was clearly such a bad thing, and having passed it was inevitable that what we’re now experiencing unless something was done. And what the Republicans chose to do (with their equally moronic colleagues in the Democratic party), was to reduce regulation on the financial sector. It’s hard not to conclude that they actually wanted this to happen, if it was so clear even then.
Paul and “Independent,” I’m curious to know — Could you become any more ignorant if you tried really hard?
Check out the following information, and look at who was trying to improve government oversight of the issue.
“These two entities—Fannie Mae and Freddie Mac—are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.” ~ Senator Barney Frank, Massachusetts Democrat (2003)
Steve, government intervention caused the housing bubble, an unnatural phenomenon.
Paul, I’d be very interested in your response to this video of Democrats explicitly rejecting Republican efforts to regulate F/F, asserting that there were no problems at F/F and comparing complaints about Franklin Raines to a lynching.
The Democrats carry their share of guilt in this, for sure. I don’t think the intention of Fannie and Freddie was particularly flawed, but giving them this pseudo-market status, and then not managing them properly, was stupid. The only punch I pull there is that at least some of the mismanagement in those organizations appears to have been criminal, which would be a tough thing to blame on the Democrats.
Blaming the current crisis on the CRA and the 2 F’s seems pretty clearly wrong to me, however, at least as a major factor. Check out this article that points out that most sub-prime loans weren’t covered by the CRA, that the lenders who were subject to CRA made fewer dangerous loans than those that weren’t, and of course reminds us that CRA was passed when I was 6.
Democrats, and many Republicans, have clearly pushed for affordable housing. I’ve seen no complaints from lenders, however, that Democrats were making them loan money to unemployed people with no savings and few prospects. That’s because greed made them do that, and lax oversight let them.
The CRA may have been passed when you were 6, but wasn’t aggressively enforced until the Clinton administration. Also, banks made subprime loans in the full expectation that FM/FM would buy them. You might find this 2005 article interesting. (I found it in this Hot Air post.)
Banks may have made those loans with the full expectation that the FMs would buy them, but they were wrong – so far as I know neither FM has any significant number of sub-prime loans on its books. I can’t bring myself to blame the Democrats because the FMs didn’t do something they weren’t supposed to do, even if I’m not a big fan of the implementation of the FMs.
Incidentally, your quote mentions derivatives, which is a bit like a Democrat mentioning guns. There’s nothing wrong with derivatives, only with how some people make use of them. In fact one of the largest uses of derivatives until recent years was to manage risk, trading off a little return for less risk.
You ignore the fact that the Community Reinvestment Act created the housing bubble in the first place. Janet Reno threatened bankers who would not make loans to poor people.
After the bubble took off, it seemed perfectly rational for everyone else to invest in the bubble…until it burst.
Do you have evidence for that assertion, Drew? Housing is a market, and markets commonly experience bubbles. One could argue that the CRA made things worse, but to say it created the situation seems excessive. Somehow we managed to have one in the UK, and we don’t have a CRA or anything like it that I know of, just an unhealthy enthusiasm for property.
Do you not understand that increased purchasing ability — due to Clinton’s expansion of the CRA — will necessarily increase the demand and (therefore price) of housing? What I said is common sense.
Also, the timing of the bubble strongly correlates with Janet Reno’s market intervention. As Laura mentioned, the article you cited completely ignores President Clinton’s role in expanding the CRA.
Moreover, the fact that some reckless “independent mortgage companies” acted more risky than more conservative banks means nothing. Most mortgages come from banks. Banking activity caused this nonsense.
And the government held a gun to the head of all bankers.