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Clinton Library's Doc Dump Reveals CRA Fueled Subprime Bubbl

hypocritexposer

Well-known member
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.

A 2012 National Bureau of Economic Research study found "that adherence to that act led to riskier lending by banks," with "a clear pattern of increased defaults for loans made by these banks in quarters around the (CRA) exam, (and) the effects are larger for loans made within CRA tracts," or low-income and minority areas.

To satisfy CRA examiners, Clinton mandated "flexible" lending by large banks. As a result, CRA-approved loans defaulted about 15% more often, the NBER found.

Exhibit A in the 7,000-page Clinton Library document dump is a 1999 memo to him from his treasury secretary, Robert Rubin.

"Public disclosure of CRA ratings, together with the changes made by the regulators under your leadership, have significantly contributed to ... financial institutions ... meeting the needs of low- and moderate-income communities and minorities," Rubin gushed. "Since 1993, the number of home mortgage loans to African Americans increased by 58%, to Hispanics by 62% and to low- and moderate-income borrowers by 38%, well above the overall market increase.

"Since 1992, nonprofit community organizations estimate that the private sector has pledged over $1 trillion in loans and investment under CRA."

Other documents reveal how the community-activist group ACORN and other organizations met with Rubin and other top Clinton aides on "improving credit availability for minorities."

Clinton's changes to the CRA let ACORN
use the act's ratings to "target merging firms with less-than-stellar records and to get the banks to agree to greater community investment as a condition of regulatory approval for the merger," White House aide Ellen Seidman wrote in 1997 to Clinton chief economist Gene Sperling.

"Community groups have come to recognize how terribly powerful CRA has been as a tool for making credit available in previously underserved communities," Seidman added.

Seidman later boasted that Clinton's 1995 CRA revisions created not only the subprime mortgage market but also the subprime securities market. Of course, subprime loans and their high default rates ruined minority neighborhoods when the market crashed.

Memos also reveal how Clinton aides held repeal of the Glass-Steagall Act hostage to strengthening the CRA. They gave Republicans deregulation of banking activities in exchange for over-regulating how those banking activities applied to low-income communities.

Clinton aides viewed ending the Glass-Steagall Act as a way to "extend the CRA to Wall Street firms" and wanted to extend it to insurers, mutual funds and mortgage bankers. But due to GOP opposition, that was "not politically feasible," Rubin told Clinton in a 1997 memo.

In 2000, HUD Secretary Andrew Cuomo lit the fuse on the subprime bomb by requiring Fannie Mae and Freddie Mac to purchase subprime, CRA and other risky mortgages totaling half their portfolios.

A 1993 memo, "Racism in Home Lending," captured the tone of Clinton's affordable-housing crusade. It proposed coordinating with the Washington Post and Congressional Black Caucus on bank investigations.

These White House papers are smoking-gun evidence of Clinton's culpability in creating the subprime bubble. The mainstream media's silence is deafening.

Read More At Investor's Business Daily: http://news.investors.com/ibd-editorials/042514-698502-clinton-library-doc-dump-reveals-role-in-subprime-bubble.htm#ixzz3030yfecZ
 

Tam

Well-known member
December 2, 2008
Don't Blame Bush for Subprime Mess
By Investor's Business Daily

Housing Crisis: A new report from the Associated Press claims that the mortgage meltdown is due largely to President Bush's failure to act in 2005. Sounds plausible — until you actually look at the facts.

"Under pressure, U.S. eased lending rules," reads the AP special report's headline. But "U.S." is really a misnomer. The news service really means "Bush."

"The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed," the report asserts.

The report goes on to catalog what it says are Bush's crimes. Namely, that his administration bowed to "aggressive lobbying" by banks and delayed doing anything for a year. This, says the AP, is "emblematic of a philosophy that trusted market forces and discounted the need for government intervention in the economy."

All utterly wrong.

Here at IBD, we've done more than a dozen pieces — most recently, in yesterday's paper — detailing how rewrites of the Community Reinvestment Act in 1995 under President Clinton, along with major regulatory changes pushed by the White House in the late 1990s, created the boom in subprime lending, the surge in exotic and highly risky mortgage-backed securities, and the housing boom whose government-fed excesses led to inevitable collapse.

Despite this clear record, we're now besieged by enterprising journalists blaming Republican "deregulation" or the president's failure to recognize the seriousness of the problem or act. But these claims fall apart, as a partial history of the last decade shows.

Bush's first budget, written in 2001 — seven years ago — called runaway subprime lending by the government-sponsored enterprises Fannie Mae and Freddie Mac "a potential problem" and warned of "strong repercussions in financial markets."

In 2003, Bush's Treasury secretary, John Snow, proposed what the New York Times called "the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago." Did Democrats in Congress welcome it? Hardly.

"I do not think we are facing any kind of a crisis," declared Rep. Barney Frank, D-Mass., in a response typical of those who viewed Fannie and Freddie as a party patronage machine that the GOP was trying to dismantle. "If it ain't broke, don't fix it," added Sen. Thomas Carper, D-Del.

Unfortunately, it was broke.

In November 2003, just two months after Frank's remarks, Bush's top economist, Gregory Mankiw, warned: "The enormous size of the mortgage-backed securities market means that any problems at the GSEs matter for the financial system as a whole." He too proposed reforms, and they too went nowhere.

In the next two years, a parade of White House officials traipsed to Capitol Hill, calling repeatedly for GSE reform. They were ignored. Even after several multibillion-dollar accounting errors by Fannie and Freddie, Congress put off reforms.

In 2005, Fed chief Alan Greenspan sounded the most serious warning of all: "We are placing the total financial system of the future at a substantial risk" by doing nothing, he said. When a bill later that year emerged from the Senate Banking Committee, it looked like something might finally be done.

Unfortunately, as economist Kevin Hassett of the American Enterprise Institute has noted, "the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter."

Had they done so, it's likely the mortgage meltdown wouldn't have occurred, or would have been of far less intensity. President Bush and the Republican Congress might be blamed for many things, but this isn't one of them. It was a Democratic debacle, from start to finish.
 
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