IBD details what many of us already know about this economic crisis we are in. That being the fact that the genesis of it lay at the feet of Democrats. Most thought it was the fault of Clinton, but in fact it goes back a bit further back to the single worst President in recent memory….Jimmy Carter: (h/t Newsbusters)
To hear today’s Democrats, you’d think all this started in the last couple years. But the crisis began much earlier. The Carter-era Community Reinvestment Act forced banks to lend to uncreditworthy borrowers, mostly in minority areas.
Age-old standards of banking prudence got thrown out the window. In their place came harsh new regulations requiring banks not only to lend to uncreditworthy borrowers, but to do so on the basis of race.
These well-intended rules were supercharged in the early 1990s by President Clinton. Despite warnings from GOP members of Congress in 1992, Clinton pushed extensive changes to the rules requiring lenders to make questionable loans.
~~~Failure to comply meant your bank might not be allowed to expand lending, add new branches or merge with other companies. Banks were given a so-called “CRA rating” that graded how diverse their lending portfolio was.
~~~In the name of diversity, banks began making huge numbers of loans that they previously would not have. They opened branches in poor areas to lift their CRA ratings.
Meanwhile, Congress gave Fannie and Freddie the go-ahead to finance it all by buying loans from banks, then repackaging and securitizing them for resale on the open market.
That’s how the contagion began.
With those changes, the subprime market took off. From a mere $35 billion in loans in 1994, it soared to $1 trillion by 2008.
Everyone should read the article from beginning to end….lots of detail. While the MSM has been busy blaming the collapse of some of our financial businesses to Republicans they have ignored the true start of the thing, which should surprise no one. Bush and McCain warned of this mess years ago and our Congress critters did nothing.
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