18 Feb

Top Banker Says Government Caused Housing Crisis

Paul Sperry @ Investors Business Daily:

Bribed by federal bailouts and threatened by lawsuits, top bankers have grudgingly gone along with the narrative that greed and deregulation caused the recession.
But one prominent CEO is breaking ranks as he leaves the embattled industry.

While running regional giant BB&T for two decades, John Allison had an insider’s view of the factors behind the crisis. A burst of greed wasn’t one of them, he says. Nor was deregulation.

“The financial industry was not deregulated, it was misregulated,” he asserted.

In his new book, “The Financial Crisis and the Free Market Cure,” Allison says at every step of the way, Washington politicians and regulators brought on the crisis and then made things worse during the panic.

Now, he warns, they’re sowing the seeds of another financial crisis, thanks to new rules sold to the public as insurance against another crisis but that in fact double down on old mistakes.

Allison says problems started in the 1990s when regulators pressured banks to abandon traditional mortgage underwriting standards.

“Under Clinton, making high-risk home loans to low-income borrowers was given priority over safety and soundness from a regulatory perspective,” he said.

The ex-president used the Community Reinvestment Act as an enforcement tool. When home prices fell years later, Allison points out, loss ratios on high-risk CRA loan portfolios soared.

Then in 2000, Clinton’s HUD required Fannie Mae and Freddie Mac, which had dominated the prime lending market, to restructure their portfolios so at least half their loans were CRA and other subprime mortgages.

“The legitimate affordable-housing market was not big enough to equal 50% of (their) giant loan portfolios,” Allison said. “To meet this political goal, Freddie and Fannie would have to consistently lower their lending standards.”

And that’s exactly what they did in the 2000s, dragging down standards across the entire industry. They also polluted the mortgage-backed securities market with junk posing as Treasury assets. At the same time, the Justice Department began investigating banks, including BB&T, for lending discrimination. Many stopped rejecting risky loans.

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About Curt

Curt served in the Marine Corps for four years and has been a law enforcement officer in Los Angeles for the last 20 years.

2 Responses to Top Banker Says Government Caused Housing Crisis

  1. FAITH7 says: 1

    Now the Government wants to do this AGAIN with No Money Down Mortgages.

    The definition of Insanity is doing the same thing over and over again expecting different results.

    This Democratic/Liberal [how far Left can I go ] Administration is Certainly INSANE…

    ReplyReply
  2. TALKING ABOUT HOUSES, THIS KANSAS EXPLOSION,
    is really big, SOME THING IS WRONG WITH THE GAS,
    AND YOU’RE NOT SUPPOSE TO HAVE A BIG SMELL OF GAS, EVEN NOT ANY SMELL, what kind of gas is it mix? if so,
    was there an error in the mixing ?
    I’m thinking that HOW MUCH octanes in that gas would be so high to produce such explosion
    which look like a propane explosion
    check that gas, for GOD SAKE
    is there anyone who would benefit in adding or remove some of chimicals LIKE ADDING OCTANES in gas, FOR A CRIMINAL PURPOSE? OR IGNORANT WORKER, OR, ELSE
    in that gas IF YOU CAN NOW,

    ReplyReply

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