Jimmah Carter started the rot that led to the present financial crisis
Posted on September 22, 2008
Much as Bush-hating media members conveniently ignore historical events that led to the invasion of Iraq in March 2003, their current finger-pointing at the White House, John McCain, and all Republican politicians for the collapse of the financial services industry lacks any honest assessment of decades-old legislation that laid the groundwork for today’s problems. In particular, 1977’s Community Reinvestment Act which required banks and savings institutions to make loans to the lower-income areas in the communities they served.
Despite how integrally tied the current crisis is to this bill enacted by a Democrat-controlled Congress and signed into law by Jimmy Carter, no major media outlet other than Investor’s Business Daily and National Review Online mentioned it during last week’s market meltdown. Going against the grain was a highly-informative editorial by IBD Thursday:
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.
Readers are strongly encouraged to review this entire fact-filled piece to not only better understand the roots of today’s financial crisis, but also to get a sense as to just how absurd media accusations of this all being Bush and McCain’s fault are.
That said, from 1989 through 1995, I managed branches for two savings and loans: Imperial Savings, which got taken over by the Resolution Trust Corporation during the S&L bailout, and; Great Western Bank which eventually was purchased by Washington Mutual. The pressure to comply with CRA was astounding, especially at Great Western as it was expanding throughout the country. Its ability to acquire other institutions was directly related to its CRA rating.
With this in mind, IBD’s views concerning this matter are spot on raising a very important question: if the role of news media is to inform the public, why does a LexisNexis search indicate that as this crisis came to a head last week, its connection to CRA, Jimmy Carter, and Bill Clinton was almost completely ignored?
Would such a revelation make it difficult for Obama-loving press outlets to point fingers at George W. Bush and, more importantly, John McCain? Yes, that’s a rhetorical question.
Posted by John Ray. For a daily critique of Leftist activities, see DISSECTING LEFTISM. For a daily survey of Australian politics, see AUSTRALIAN POLITICS Also, don’t forget your roundup of Obama news and commentary at OBAMA WATCH (2). Email me (John Ray) here
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6 Responses to “Jimmah Carter started the rot that led to the present financial crisis”
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John, you have fallen for a Limbaugh, Kudlow, Hannity sponsored lie. I read the congressional testimony concerning the CRA and I encourage you to do the same. 80% of the subprime loans were issued by mortgage lenders and others not covered by the CRA. Yet Limbaugh said just this morning that the poor banks were “forced” to make these loans. The Republican Party has followed these clowns right over the cliff.
what part of “The Carter-era Community Reinvestment Act forced banks to lend to uncreditworthy borrowers, mostly in minority areas.” do you NOT understand?
justanotherdave… stop drinking the koolaid and start thinking for yourself (spewing dem talking points will lead to severe mental breakdown)
Ummm, you can not be serious with this revisionist history can you??? First off, the CRA is not the problem, it wasn’t even part of the problem. Trying to link an almost 40 year old law on the books as the reason for the failure shows how the spin misers are doing it. The problem, as all of America knows, was DEREGULATION. You know, what Regan hailed, and what every republican cries about. Keep the government out of business, right? Well, two acts allowed the Wall Street disaster to hit, and they were both republican bills which removed regulation from the investment banks. The Gramm-Leach-Bliley Act repealed the Glass-Steagall Act which was put in after the depression. It stopped financial institutions from getting their hands in too many pots. The second, The Commodity Futures Modernization Act of 2000, removed regulation from the banking and insurance industry, which allowed the firms to package the sub-prime mortgages into securities and it’s why everything collapsed.
So now, instead of looking up the facts, figuring out what the issues were, you went off and sprouted the typical GOP talking point which ignores the problems they created. Deregulation is what killed wall street, and it is what allowed it to happen. Deregulation, which the GOP has been saying is the cures to everything for decades is what caused this failure. Now, to try and blame a 30+ year old law shows not only your ignorance of the situation, but also how far you have to go down the drain to get something, anything that will stick against the wall.
Yes, Mike, the same Gramm-Leach-Bliley Act that Bill Clinton signed into law in 1999!
Omission of the facts doesn’t not make them truths, Mike.
Mike, Mike, Mike. You try to impress us with your “knowledge” of the inner workings of Congress, but either you really don’t know what you’re talking about or you are purposely trying to mislead us. You wouldn’t try to mislead us, would you Mike? No, a liberal would never do that.
The Shad-Johnson Jusrisdictional Accord, implemented and signed into law while Ronald Reagan was president by the way, specifically banned single-stock futures and was susbsequently repealed by the Commodity Futures Modernization Act, which was signed into law in 2000 by Bill Clinton. You know him, don’t you Mike? He’s the same guy who signed into law the Gramm-Leach-Bliley Act in 1999 which repealed your beloved Glass-Steagall Act.
Once Slick Willy repealed GSA and signed into law The Commodity Futures Modernization Act, which you so pointedly hold up as having caused the current financial meltdown, Marc Rich – remember him? – was free to defraud untold numbers of people of hundreds of millions of dollars with his ponzi scheme. And for all his patriotic efforts, Rich, while hiding in Switzerland beyond extridition, was subsequently pardoned by Bill Clinton for all of his political contributions to Bill Clinton, just as Bill and Hillary were packing up the Oval Office’s furnishings and putting them on the U-Haul for their ride to New York.
Tsk-tsk, Mike. You’re little liberal talking head points sound like they are coming from nothing but a talking pin head.
LOL. Mike must be a typical MSM person who is in the tank for Obama. Forgetting his bias for a moment, let’s look at his style of argument. The original bill, signed in 1977 (31 years ago), is called “an almost 40 year old law.” Um, even I can round better than that!
This is similar to a recent Time magazine article, that, in comparing the two candidates, says, “one is in his 70s and one is in his 40s.” (Actual ages 72 and 46.) How much you wanna bet that if the ages were 76 and 42, Time would use the exact figures or note a difference of 34 years?!? Rhetorical–we all know the answer.