Watching the O’Reilly Factor talking points tonight (June 9, 2016), the host said (paraphrased) “The 2008 financial collapse was caused by greedy mortgage companies and bankers.” (I am a former employee of one of those now defunct greedy mortgage companies.)
This is ultimately correct, but misses an important component which provided the fertile ground for this bad behavior to prosper: Government policies and aggressive government practices which got this messy sub-prime ball rolling.
- The Community Reinvestment Act (CRA) – 1977, Carter Administration
- Alternative Mortgage Transactions Parity Act (AMTPA) – 1982, Reagan Administration
- The Housing and Community Development Act of 1992, Clinton (or Bush #1, depends who signed it)
Click this Link to a Subprime Financial Crisis Article on Wikipedia for a surprising decent, detailed (and long) entry on this topic touched on these points. (I am saving a PDF for when someone catches wind that is a decent handling of this topic and decided to change it.)
Government Regulation / Legislation
I have frequently heard cited the Community Reinvestment Act as the true poison pill, and the Janet Reno under the Clinton Administration threatening banks with punitive actions if they didn’t change their “racist” lending ways. Here are some supporting sources:
- Investors Business Daily
- Remember Janet Reno threatening the banks? Smoking-Gun Document Ties Policy To Housing CrisisBy PAUL SPERRY, FOR INVESTOR’S BUSINESS DAILY
- New Study Finds CRA ‘Clearly’ Did Lead To Risky Lending
- YouTube Video Transcript of Janet Reno’s conversation with the Bankers
- Rush Limbaugh: Federal Regulators Admit Clinton Mortgage Scam caused the Economic Crisis
Combine that with 1982’s Adjustable Rate Mortgages and the Affordable Housing purchase mandate from 1992 (Housing and Community Development Act) we had a perfect storm seeded in the 1990’s that came to blow up in 2008.
Question of the Day
- Why is it President Obama, the media, and many other government types continue to get away with saying it’s George W. Bush’s fault?
- Why do they like to conveniently forget President Bush called for Fanny Mae and Freddy Mac to be reigned in from their on-fire Sub-Prime Lending ways? (out of control, contributing HEAVILY to the problem) :