WHAT REALLY CAUSED THE 2008 RECESSION
Around 1977 Jimmy Carter noticed something unfair was going on.
Banks in poor communities were accepting deposits from minorities, but would not give loans to minorities.
To address the situation President Carter passed a law called the Community Reinvestment Act. The law required banks to provide loans to the minority communities from whom they were accepting deposits.
But no one enforced this law for a very good reason.
Banks depend on people repaying loans to stay in business.
The banks were only giving loans to people who could afford the payments. The banks weren't refusing to give loans to people because of skin color. The only color they cared about was green. If you had money and paid your bills on time... you could get a loan. If you were poor or didn't pay your bills on time, you couldn't get a loan.
Although it was not intentional, the result of this system was... the rich get richer and the poor stay poor.
In 1994, Bill Clinton tried break this vicious cycle.
In Clinton's own words, ”I enforced the Community Reinvestment Act for the first time and over 90 percent of all lending done under that law was done when I was president.”
Suddenly banks were forced to make home loans to low-income wage earners, people with bad credit and minorities who couldn’t pay them back. This was combined with an all out assault on the mortgage industry by the Federal Government. HUD, FHA, Fannie Mae, Freddie Mac, etc.
Bill Clinton's 1996 website explains how this worked -
On The Issues -
Expanding Affordable Housing
FHA is also providing home purchase loans for low-income and minority home buyers at more than twice the rate of conventional home purchase loan insurers.
Working to reduce barriers to home ownership caused by unlawful discrimination. To date, HUD has signed 70 “Best Practices” agreements with key lenders that are resulting in more fair lending practices and expanded opportunities for low-income and minority families.
Bill Clinton 1996 On The Issues Expanding Affordable Housing
Ultimately, there were over 100 of Clinton's "Best Practices" for banks, under his new rules... Credit History didn’t matter. Job History didn’t matter. Income didn’t matter. Correct loan documentation didn’t matter either. Just give loans to anybody, whether they know how to handle credit or not.
HUD lowered down-payments from 20% to 3% and then to 0%.
The Clinton administration ordered Fannie and Freddie, who hold most of the home mortgages in America, to expand their quota of risky loans from 30 percent to 50 percent.
In banking, the phrase “sub-prime loan” soon became common. It was really just code for saying, "The people receiving these loans can't pay them back." But a strange thing happened, the ever increasing equity in the new homes made it possible to “balance the books”…at least for a little while.
Even if you didn't have income, when you buy a house for $100,000 dollars and within a few months it climbs in value to $200,000, the house equity makes its own payments.
Because of Clinton’s strong arm tactics against lenders, a giant housing boom began. A whole new class of home buyers flooded the market. The laws of supply and demand quickly took over. Home values rose and rose and rose.
But most in the banking industry knew something was very, very wrong. The banks knew the loans they had been forced to issue were bad. The banks had to get rid of them or go bankrupt. But how?
The ultra-liberal Slate writes -
President Clinton removed almost all regulations on the financial sector and told the banks - get rid of these “sub-prime loans” any way you see fit.
The far left Daily Kos explains what happened next -
In 1999, Democrats led by President Bill Clinton and Republicans led by Sen. Phil Gramm joined forces to repeal Glass-Steagall at the behest of the big banks. What happened over the next eight years was an almost exact replay of the Roaring Twenties. Once again, banks originated fraudulent loans and once again they sold them to their customers in the form of securities. The bubble peaked in 2007 and collapsed in 2008. The hard-earned knowledge of 1933 had been lost in the arrogance of 1999.
Bill Clinton’s Secretary of Labor also explains how Clinton caused the financial collapse
The Project On Government Oversight offers a chilling, in the room viewpoint, taken from actual handwritten notes - as Clinton, Rubin, Greenspan, Summers and Levitt charted the course to America’s financial destruction. Quote -
Rather than taking the opportunity to tighten the rules for derivatives trading, Congress and the President enacted an appropriations bill in October 1998 that included a six-month moratorium prohibiting the CFTC from taking any action.
Douglas Elmendorf—who was serving on the Council of Economic Advisers and is now the head of the Congressional Budget Office, wrote - “As I suggested before, I think it’s useful to emphasize the idea that financial-market innovation has made the existing disclosure rules and regulatory approaches inadequate,” he wrote. “I’m not sure how much of the story this really is, but it’s a convenient argument because it absolves us of regulating badly in the past and neatly justifies the range of actions we’re now proposing.”
The following year, Congress passed and President Clinton signed the Commodity Futures Modernization Act, which effectively shielded OTC derivatives from virtually all regulation or oversight
How the Clinton Team Thwarted Effort to Regulate Derivatives
The reason DailyKos, Reich and Clinton are willing to admit guilt in causing the recession in some areas while denying it in others, is a common tactic among guilty criminal defendants.
Plead guilty to a lesser charge in order to avoid responsibility for a more serious charge.
If you place the blame on “creative investing” or as Warren Buffet called it, “financial weapons of mass destruction” which were created after Clinton repealed the Glass-Steagall Act. Clinton can share blame with the banks and some Congressional Republicans.
If you place the blame on the Government’s mishandling of home loans, Clinton can share the blame with his regulatory agencies and Congressional Democrats who blocked investigation of the fraud that was occurring.
If you place the blame on the enforcing the Community Reinvestment Act, lowering home down payments to 0%, ordering of Fannie and Freddie to increase their number of risky loans to 50%... there is no one to blame but Bill Clinton.
In this NY Times article, Clinton goes into great detail explaining how the actions he took are directly blamed for the collapse. He lays it out just like a lawyer, as if these are charges against him. Clinton then attempts to plead guilty to what he considers the lesser charge.
Gas + Match = Boom.
Clinton forced banks to loan money to people who couldn’t pay them back.
Clinton then destroyed the regulations on the banking industry.
Banks did what they had to do to stay in business.
Everybody was getting rich.
A giant boom occurred.
In 2000, Bush took office, he saw the problem and tried to fix it.
He was quickly labeled a racist for trying to stop lending programs that were putting many minorities into homes which they could not afford.
NY Times 2003-
The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.
Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.
The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.
''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''
Representative Melvin L. Watt, Democrat of North Carolina, agreed. ''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said.
In 2006, it was revealed that Fannie Mae had overstated its earnings – to which its senior executives' bonuses were linked – by a stunning $9.3billion.
Dominic Lawson: Democrat fingerprints are all over the financial
Bush should have done more but the housing boom was occurring on his watch too. It's very hard to stop a problem when everybody is getting rich in the short term.
Then the FED went crazy. 17 consecutive interest rate hikes.
The Fed kept rates high as people liquidated their life savings and emptied their 401k accounts trying to save their home. Finally, the economy collapsed in 2008.
When the people with adjustable rate home loans had been bled dry and could not make their mortgage payments, the foreclosures started and the dominoes began to fall.
Bill Clinton is 100% responsible for every part of this mess.
He was the most evil, reckless, short-sighted President in America’s history.
What makes it worse is that he was also brilliant.
If Jimmy Carter did this, I would say he made a mistake. He was just trying to help poor people get into homes.
But Clinton’s actions went way beyond a simple mistake. People in his own administration were trying to warn him and stop him… but he didn’t care. He wanted the short term gain at any cost.
PBS -
The Warning: Brooksley Born's Battle With Alan Greenspan, Robert Rubin And Larry Summers
So, for better or worse that is why the 2008 crash happened.
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