Who caused this economic downturn and what should we do about it?
Almost no one realizes that this entire subprime lending mess was created by the Community Reinvestment Act, which was passed by President Carter, a Democrat, in 1977. Later on in the 1990s, Bill Clinton, another Democrat, passed laws to enforce the original bill. The purpose of the CRA is to force banks to make risky loans to people who can’t afford to repay those loans.
The extremely left-wing Los Angeles Times explains in 1999 that the CRA was passed to force banks to make risky loans.
Under Clinton, bank regulators have breathed the first real life into enforcement of the Community Reinvestment Act, a 20-year-old statute meant to combat “redlining” by requiring banks to serve their low-income communities. The administration also has sent a clear message by stiffening enforcement of the fair housing and fair lending laws.
In 1992, Congress mandated that Fannie and Freddie increase their purchases of mortgages for low-income and medium-income borrowers. Operating under that requirement, Fannie Mae, in particular, has been aggressive and creative in stimulating minority gains… Fannie Mae has agreed to buy more loans with very low down payments–or with mortgage payments that represent an unusually high percentage of a buyer’s income. That’s made banks willing to lend to lower-income families they once might have rejected.
The extremely left-wing New York Times noted in 1999 that the GSEs gave out the risky loans under duress from Democrat Bill Clinton.
Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.
According to the New York Times in 2003, George W. Bush tried to stop the Democrats from ruining the economy with these forced loans. He was blocked by Democrats like Barney Frank.
The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.
”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”
Here are some video clips to prove that the Democrats opposed regulating the GSEs. They are responsible for this mess, along with the irresponsible people who signed up for these loans that they could not repay.
Timeline of the events in the crisis: Bush was the first to recommend regulating the GSEs in April, 2001. In 2003, Bush tried to create a new federal agency to regulate the GSEs. He was blocked from doing so by the Democrats in the Senate. In 2005, Alan Greenspan warned that failing to regulate the GSEs could be a catastrophe. Again, Democrats blocked the effort to regulate Fannie Mae and Freddie Mac. The video shows Democrat Chuck Schumer protesting that regulation is not needed. In 2006, McCain and other Republicans introduced a bill to regulate the GSEs. Again, the Democrats voted against it and nothing happened.
Republicans and Democrats in their own words on the GSE accounting practices: Here we have Republican Rep. Richard Baker, Democrat, Democrat Rep. Maxine Waters, Democrat Rep. Gregory Meeks, Republican Rep. Ed Royce, Democrat Rep. Lacy Clay, Republican Rep. Christopher Shays, Democrat Rep. Arthur Davis, Democrat Rep. Barney Frank, Republican Rep. Don Manzullo. Shays notes that the GSEs make many contributions to Democrats who are blocking their regulation.
Fannie Mae CEO addresses Democrats: Fannie Mae CEO calling Obama and the Dems the “Family” and “Conscience” of Fannie Mae. The Democrats obstructed the regulation of the GSEs while taking political contributions from them, especially Obama. Franklin Raines, Jamie Gorelick and Jim Johnson were all executives at the GSEs and are all Democrats. Other Democrats like Penny Pritzker ran other mortgage banks into the ground, and now work for Obama.
According to Human Events, Obama himself sued banks on behalf of ACORN, to force the banks to make these risky loans.
Obama sued Citibank under the Community Reinvestment Act in a typical ACORN-style lawsuit to force the bank to make these risky loans. ACORN filed many of this type of lawsuit alleging racism in all of them.
According to opensecrets.org, Obama was also the second-highest recipient of political contributions from the GSEs. The American Spectator notes that he included 5.2 billion dollars of taxpayer money for ACORN in the porkulus bill.
UPDATE 1: The Achoress just posted even more of the history of this mess here. She has a link to Nice Deb’s post which contains about 2 dozen warnings issued by the Bush administration about the looming crisis, including 17 warnings in 2008 alone.
UPDATE 2: Here’s an even better timeline than mine, by Roger Kimball.
29 thoughts on “Democrats caused the recession and Republicans tried to stop it”
Yea, Republicans tried to stop the recession. Sure they did. How could that be true? Never once during the last glorious year of their nonplussed President’s administration did the Republicans even admit to a recession.
Sir, did you read the post? I linked to a 2003 New York Times article. The first two paragraphs of the 2003 article is as follows:
What do these words from the most left wing newspaper mean to you, sir? What meaning do you get from the language? This was written 4 years before the market started falling in 2007. Show me how I am wrong.
And when you are done with that, please explain the last few paragraphs of the same article from 2003 in the New York Times, which say this:
I appreciate your comment and your consideration.
Ben, you obviously have a reading comprehension problem. Remedial classes are available at your local community college.
Ben pull your head out of your ass, our country has been destroyed by the democrat party, PERIOD!
Clinton became a republican under a republican congress. He still is. Republicans love recession. It means that the consolidation of wealth to a few is working. This economy is a direct result of reaganomics. Our biggest problem is that people like you, that believe what the wealthy tell you, is part of what got us into this depression.
Let’s see the argument.
No, the problem would be from people like you who believe in the sob stories that your politicians toss out, constantly vilifying the wealthy just to push for more political power. And if you are even thinking about using jobs overseas as an argument, you might as well give up because there is a reason it happens and is ironically, the thing that keeps jobs over here.
Oh! Lower wages, higher interest, higher cost of living, the wealthy getting taxed close to 50% etc. are sob stories? You may as well state you’d take a bullet for the wealthy. The political power we seek is for the people, not the corporations. It’s for unions and workers rights. Education. God knows we’ve failed miserably over the 35 year “rule” by the right. For health care. You have an good chance of getting diabetes. I fight for the children that are screwed right out of high school. I’m old and set. I don’t care about me. I care about the future of the middle class. I care.
Clinton dismantled welfare as it was. No Democrat would have ever done that. I could go on and on about the influence the republican congress had over him and the many things he caved on.
Clinton raised taxes , dismantled our Military , and with held raises and benefits from our Troops causing many to get food stamps to feed their family.. welfare increased under bill Clinton because more people were getting welfare.. and Clinton like Johnson and Carter robbed Social Security , it was Clinton that did the worse wiping it and then raised taxes on SS.. And one more bubble to burst , and that is bill did not pay down the debt nor he leave a surplus
Question: Do we know how many people who got CRA loans actually defaulted on their mortgages? Is it higher than the national average?
Question: Isn’t it also true that banks made many risky loans on their own accord, without the CRA?
Comment: I think the cause of the financial collapse was not risky home loans per se, but the fact that these risky loans were chopped up, bundled, sold off and “insured” by credit default swaps and other exotic financial instruments.
Please state which claim of mine you disagree with and then supply some evidence to refute it. You will also need to refute the evidence I presented for whichever claim that you are denying.
Some great links from government sites implicating bush; from the site above: BUSH ADMINISTRATION ANNOUNCES NEW HUD “ZERO DOWN PAYMENT” MORTGAGE
Initiative Aimed at Removing Major Barrier to Homeownership
A book with a nice quote (formerly from the whitehouse.gov site):
Quote: The President set a goal to increase the number of minority homeowners by 5.5 million …
Hmmmmmm…wintery’s ideas seem to be breaking apart on closer scrutiny:)
Sigh, this is ALL TRUE. Finally, you make a point.
But Bush’s goal was to cut out the requirement for downpayments. If you read the article, the bad loans were being made during CLINTON’s two terms from 1992 to 2000. You have to deal with that. The article you are quoting from is dated 2004 – MANY YEARS after the problem had started, according to the left-wing LAT and NYT.
Read my post and tell me what you think of Bush’s efforts in 2003 and McCain’s efforts in 2005 to regulate Fannie Mae and Freddie Mac. And you have to tell me what you think about the DEMOCRAT bankers I mentioned who worked for Obama on his campaign. Come on, now. Admit that Bush did the right thing and that the bankers were Democrats and they donated to mostly Democrat senators to block the oversight that the Republicans wanted to impose.
By the way, great comment. Gold star!
You don’t think there all working togather?
No, I do not.
In 2003, Republicans controlled both branches of Congress (108th) and the White House. What happened to Fannie Mae and Freddie Mac regulatory reform under Republican leadership? Nothing.
Honestly, dreamer liberal Democrats started this thing with good intent. Greed mutated, what was supposed to be a good thing into a downward spiral for the economy. There has to be checks and balances for the lender. Congress, didn’t have the balls to put those in. Both parties suck. They both have to tip toe around and make the IGNORANT American public happy. The I have to have it now, even if I can’t afford it, $30,000 millionaire public.
That said, I think this article addresses the symptom of the root cause of the recession. What caused this recession is global competition; so that, job loss, wage suppression, and short sided corporate behavior became widespread. Face it, our economy sucks because Americans are under the illusion that they are the best at everything and no one can compete. In a global economy, we will eventually end up looking like the rest of the world.
Republicans never had a filibuster-proof Senate. Their majority in both houses was razor thin. Nice try though.
Thank You for your time and effort getting this message out there! What was all the ‘easy low payments’ for the first couple of years, and then a ‘adjustment’. Everyone that signed up for that knew in advance it was coming, Seems like it was a easy “I didn’t know that, they tricked me.” I remember the democratic leaders standing with Fannie and Freddy, “Doing a Great Job.” Again, Thank You Wintery Knight.
none of this matters now. Obama is the president again. Probably the worst president ever and America has to hold on another 4 years. The nightmare continues.
And you also have to remember that the Wall Streeters that bundled all those sub-prime loans and sold them insured with their credit default swaps are also Democrats. Same Wall Streeters who in 2008 gave more money to the Obama campaign than was ever given by Wall Street to any Presidential campaign. BTW, Wall Street is in NYC, a city where the Republican Party essentially doesn’t even exist.
Everyone thinks that the Wall Street bankers are conservative, but you just have to look where they send their money during elections.
Yeah, the press has done a great job selling the “Wall Street is full of Republicans” nonesense. What a crock.