Thursday, September 18, 2008

Carter, Clinton, Obama, and the mortgage crisis.

In 1977 Jimmy Carter signed into law the Community Reinvestment Act (CRA) which forced banks away from market oriented, conservative lending into high-risk loans to unqualified customers in order to improve home-ownership rate in minority neighborhoods. He signed the CRA largely due to political pressure from left-wing activist groups and against the overwhelming opposition from the mainstream banking community.

The CRA was a poorly enforced, moderately harmful, albeit well-intended bill and it stayed that way until, in 1995, president Clinton turned it into the monster that it is today. Turning the subjective regulations into statistical mandates, Clinton essentially forced the banking industry to maintain a large percentage of their business in high-risk, low-income minority neighborhoods. The result was that the percentage of loans that qualified as CRA approved increased at more than double the rate of normal loans. Essentially, the government forced banks to put more and more of their resources into increasingly insecure, albeit politically correct investments.

It gets worse though when you look at so-called community groups like ACORN and how they use the CRA to extort millions of dollars from banks. An additional Clinton era regulation was the increased severity to a banks rating not only if they didn't fulfill enough CRA loans but also if one of dozens of activist groups complained - a simple complaint could cost the bank their rating. These so-called community groups are not blind to the power they wield and neither are the banks. There is a semi-silent but mutual agreement that if these groups don't make complaints then the banks will not only give out the required loans to unqualified minorities but that they will also give millions of dollars directly to the activist group itself. ACORN (as well as it's many, many other seedy and criminal aspects) is one of the worst extortionists of this kind and has long-standing ties to Barack Obama.

Sen. Obama has not only briefly worked for ACORN but he has also doled out millions of dollars to them by way of his work as a board of director on the Woods fund of Chicago as well as his time as an Illinois state senator. A housing bill currently in the senate, supported by Obama and ACORN would set aside millions of dollars in tax-payer money for these "community groups."

The overall effect is that banks are forced into irresponsible practices by a coalition of powerful lobbyist/activist groups, indebted or corrupt politicians, and the coercive laws that they put in place leading inevitably to financial ruin, leaving the taxpayers footing the bill for tens of billions in losses while lining the pockets of racist opportunists to the tune of millions.

Will Senator Obama likely continue the Clinton-era interventionism that helped create this economic crisis by pandering to groups like ACORN? Given his explicit support of the group up to this point, it seems likely...

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