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This is the second of two pages about The Great Wall Street Bailout of 2008. On the first page, there was some lengthy discussion about bailouts and socialism and the nationalization of banks, mortgage companies, and auto makers. This page has commentary about the various factors that brought the country to brink of socialism -- and (some would say) nudged it over the edge. The automobile industry (UAW) bailout was the result of extremely high labor costs, along with the simple fact that people don't want to pay $30,000 for an unreliable car that won't make it to 100,000 miles. But all the auto industry commentary has been moved to this page. Terrorism / Sabotage Financial terrorism suspected in 2008 economic crash. Evidence outlined in a Pentagon contractor report suggests that financial subversion carried out by unknown parties, such as terrorists or hostile nations, contributed to the 2008 economic crash by covertly using vulnerabilities in the U.S. financial system. The unclassified 2009 report "Economic Warfare: Risks and Responses" by financial analyst Kevin D. Freeman, a copy of which was obtained by The Washington Times, states that "a three-phased attack was planned and is in the process against the United States economy." Financial terrorism suspected in 2008 economic crash. Evidence outlined in a Pentagon contractor report suggests that financial subversion carried out by unknown parties, such as terrorists or hostile nations, contributed to the 2008 economic crash by covertly using vulnerabilities in the U.S. financial system. The unclassified 2009 report "Economic Warfare: Risks and Responses" by financial analyst Kevin D. Freeman, a copy of which was obtained by The Washington Times, states that "a three-phased attack was planned and is in the process against the United States economy." Was the Economic Crisis Manufactured? In the summer of 2008 as McCain and Obama were in the midst of their campaigns to capture the presidency, a series of events dramatically changed the focus of the campaign from Iraq to the economy. From that point on, Obama took the lead and eventually won the presidency. Now, a full two years later, the Pentagon has issued a report on the series of events that led to the 2008 economic crash. ... This author believes there is enough information to at least consider that this crisis was manufactured for political gain. Right here at home. Former SEIU Official Reveals Secret Plan To Crash The Stock Market. A former official of one of the country's most-powerful unions, SEIU, has a secret plan to "destabilize" the country. The plan is designed to destroy JP Morgan, nuke the stock market, and weaken Wall Street's grip on power, thus creating the conditions necessary for a redistribution of wealth and a change in government. The former SEIU official, Stephen Lerner, spoke in a closed session at a Pace University forum last weekend. The Editor says... That sounds like treason to me. Media Ignore Stephen Lerner's Revolutionary Plan to Bring Down US Economy. If you google "Stephen Lerner" — the former SEIU employee who made some rather inflammatory remarks at a liberal conference held this past weekend at Pace University, as we have reported — would it surprise you that only a handful of opinion blogs (most of them conservative) are covering the jaw-dropping speech... Union Thuggery Run Amok. Having lost its war on economics, the SEIU has declared war on the economy. Literally. One of its top minds was caught vowing to crash the stock market to redistribute wealth. Is this a union or a subversive group? Union Organizer Defends His Plan To Crash The Stock Market. Stephen Lerner, a veteran union organizer, wants collective bargaining for homeowners that owe money to the big banks. And this week, he was caught on tape talking about a "mortgage strike" against the big banks. He suggested that a large number of homeowners stop paying their mortgage until the banks agree to negotiate and modify loans. Congress No One Left to Pander To. [Scroll down] President Obama signed the 2,300-page Dodd-Frank law, which studiously ignores the real causes of the financial crisis (i.e., easy money and government incentives to engage in risky loans to uncreditworthy borrowers), institutionalizes "too big to fail," and exempts Fannie Mae and Freddie Mac from oversight. Even in Washington, it's rare to find a law that is so misconceived, ineffectual, and mischievous. That's what comes of letting Democrats write their own, and our, rules. Whitewashing The Crisis. The Financial Crisis Inquiry Report blames regulators for falling asleep on the job and missing all the shoddy mortgage lending. They didn't miss it. They encouraged it. Government against the People. In May 2009, the Financial Crisis Inquiry Commission was established to investigate the causes of the financial and economic crisis. Six of the 10-member commission were chosen by the congressional Democrats, and four were picked by the congressional Republicans. (Rather than truly being independent, the commission was designed to protect the political flanks of many of those who had caused the problem.) The 500-page report that was sent to the president was only endorsed by the six Democratic members. What Caused the Financial Crisis. [Scroll down] Mr. Wallison concludes his argument: "What we know is that almost 50 percent of all mortgages outstanding in the United States in 2008 were subprime or otherwise deficient and high-risk loans. The fact that two-thirds of these mortgages were on the balance sheets of government agencies, or firms required to buy them by government regulations, is irrefutable evidence that the government's housing policies were responsible for most of the weak mortgages that became delinquent and defaulted in unprecedented numbers when the housing bubble collapsed." The tragedy is that the financial crisis continues because Congress misdiagnosed the problem and came up with a 2,000-page "solution" that will only make matters worse. The Triumph of Propaganda. [Scroll down] Amazingly, any attempt to hold the government accountable for its role in the subprime meltdown is dismissed as right-wing propaganda. This dismissal is left-wing propaganda. Say it ain't so. Last decade, liberal Democrats decided to impose a system that encouraged and enabled home ownership by people who could not afford to buy homes. This decision played a major role in nearly wrecking the banking system and in throwing the economy into a deep recession. Now, even as the economy labors to overcome the effects of that recession, the same crowd is about to strike again. In combination with lawyers and some judges, liberals Democrats are seizing on what appears to be a technicality to enable people who can't afford to keep up payments on their homes nonetheless to keep the homes. Congress' Financial Mess. Employees in government regulatory agencies grew from 146,139 in 1980 to 238,351 in 2007, a 63 percent increase. In the banking and finance industries, regulatory spending between 1980 and 2007 almost tripled, rising from $725 million to $2.07 billion. So here's my question: What are we to make of congressmen, talking heads and news media people who tell us the financial meltdown is a result of deregulation and free markets? Are they ignorant, stupid or venal? We've legalized theft in America. President Obama went on Jay Leno's popular Tonight Show and talked about the current crisis. Listening to him, there seems little doubt that everything started on Wall Street. "The problem is ... people were able to take huge, excessive risks with other people's money." But, Mr. President, half the mortgages in this country are owned or guaranteed by Fannie Mae and Freddie Mac — which were and are backed up with the money of us taxpayers. An easy flowing mortgage credit market built by politicians, by setting us taxpayers up to guarantee it all, which is what we wound up doing, is what started this whole thing. The Democrats' Friends 'n Fat Cats Protection Plan: According to government watchdogs at the Federal Housing Finance Agency, the chief executives of Fannie and Freddie raked in a combined $17 million in 2009-2010 — the period when the government-sponsored entities were handed over completely to federal conservators. The top six executives at the two institutions pulled in a combined $35 million over the past two years. Magic Numbers in Politics. Our current economic meltdown results from the federal government, under both Democrats and Republicans, declaring home ownership to be a "good thing" and treating the percentage of families who own their own home as if it was some sort of magic number that had to be kept growing — without regard to the repercussions on other things. Congress lives up to its 10% approval rating. America has survived a feckless political class in the past, and it will again after this week. But Monday's crash and burn of the Paulson plan on Capitol Hill reveals a Washington elite that has earned every bit of the disdain that Americans have for it. This crowd can't even make sausage. The 228-205 defeat reflects badly on all concerned, starting with the Democrats who run the House. The majority party is responsible for assembling a majority vote, and Speaker Nancy Pelosi failed in that fundamental task. Obama Subsidizes the Wrong People. President Obama needs to say that a big part of the reason the housing market in the U.S. is so screwed up is that government has for decades been using housing as a misguided social engineering experiment. ... People did what the government-distorted economics of the housing market told them to do, and now they we have a financial mess because of it. No senior administration official has conceded that is the case. No one has said that a big part of the reason why housing is so messed up in the U.S. is because of misguided governmental meddling in this market. No one has conceded that it is not every American's birthright to be a homeowner. Saddest Thing About This Mess: Congress Had Chance To Stop It. Could the crisis at Fannie Mae-Freddie Mac and the subprime meltdown have been avoided? The answer is yes. As early as 1992, alarm bells were going off on the threat Fannie and Freddie posed to our financial system and our economy. Intervention at any point could have staved off today's crisis. But Democrats in Congress stood in the way. Government Funded Front Groups. [Scroll down] Fannie and Freddie two reckless mortgage monsters and the fuse that lit the subprime bomb spent more than 170 million dollars influencing the Best Congress Money Can Buy during the decade preceding the crash. They both made the list of the top 20 lobbying organizations buying their way to success. Incidentally, during the same period they were also government backed and packed with hacks including President Obama's chief of staff, Rahm Emmanuel. Obama's regulatory disaster. Contrary to the president's talking points, the proposed regulations will not prevent "a second Great Depression." In fact, the problems that created America's recent financial troubles have been ignored in pending legislation. Nothing is being done to reform government-backed lenders Fannie Mae and Freddie Mac despite their history of fraud and responsibility for taxpayers being saddled with $400 billion in bailouts. Congress Tries To Fix What It Broke. As the financial crisis spreads, denials on Capitol Hill grow more shrill. Blame an aloof President Bush, greedy Wall Street, risky capitalism — anybody but those in Congress who wrote the banking rules. Neither a Borrower Nor Lender Be. The public's suspicion of anything proposed by Congress is well founded. Congress devotes almost all of its time and energy to the appearance, rather than the reality, of solutions. We are witnessing the disintegration of a profoundly unserious political culture in which nobody really knows what they are doing. Only when a crisis is on top of Congress does any real deliberation take place, and then — as in the case of renewed oil drilling off coast lines — the solution is essentially a conservative one, marking a reluctant return to common sense. The Wrong Rx for Wall St.. Back in 1999, Congress opened the door to the subprime mortgage crisis when it repealed the Glass-Steagall Act, the 66-year firewall between commercial banks and investment houses. ... Though designed to lift restrictions that prevented US financial institutions from competing globally, the repeal also encouraged banks to make intemperate high-risk loans and to create exotic new financial products. Congress Lies Low To Avoid Bailout Blame. 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. Bill Clinton, Home Wrecker. [Scroll down] Rewind to 1994. While everyone was worried about Clinton socializing health care, he was busy socializing mortgages. To boost minority homeownership, Clinton toughened anti-redlining rules and launched a federal assault on mortgage underwriting standards. He enlisted no fewer than 10 federal regulatory agencies to crack down on prudent lenders. He named his anti-bank SWAT team the Interagency Task Force on Fair Lending. Flashback to 1999... Fannie Mae Eases Credit To Aid Mortgage Lending. Home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings. In July [1999], the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year [1998], 44 percent of the loans Fannie Mae purchased were from these groups. Can Congress Fix A Problem It Caused? Nothing could more painfully demonstrate what is wrong with Congress than the current financial crisis. Among the congressional "leaders" invited to the White House to devise a bailout " solution" are the very people who have for years created the risks that have come home to roost. Before D.C. Gets Our Money, It Owes Us Some Answers. Congress has an obligation to protect the taxpayer. Congress has an obligation to limit the executive branch to the rule of law. Congress has an obligation to perform oversight. Congress was designed by the Founding Fathers to move slowly, precisely to avoid the sudden panic of a one-week solution that becomes a 20-year mess. The end of the American Dream. Beyond any liberal Democrat's wildest dreams, this unprecedented government-spending binge, has been enabled by a narrative. According to this narrative, we now understand that unbridled capitalism doesn't work. Unregulated markets are behind today's problems and all agree that we need more government. According to our president, because "Big banks traded in risky mortgages ... lenders took advantage of homebuyers ... homebuyers knowingly borrowed too much ..." we have today's housing crisis. But it's all so untrue. What has failed in our country is not capitalism. It is our intentional undermining of it. False Solutions and Real Problems. There were certainly places here and there where it took half a family's income just to put a roof over their heads. ... Almost invariably, these severe local problems had local causes — usually severe local restrictions on building homes. These restrictions had a variety of politically attractive names, ranging from "open space" laws and "smart growth" policies to "environmental protection" and "farmland preservation." Obama: Buyer's Remorse. The existing regulation of U.S. banks was not accompanied by anything faintly resembling actual scrutiny and oversight. It was the government that had created Fannie Mae and Freddie Mac to buy up and "securitize" all those bad loans banks and mortgage companies were required by law to make. The short-term spending in the billions that has been made is widely regarded as a massive waste of taxpayer dollars. U.S. to Lose $400 Billion on Fannie, Freddie, Wallison Says. Taxpayer losses from supporting Fannie Mae and Freddie Mac will top $400 billion, according to Peter Wallison, a former general counsel at the Treasury who is now a fellow at the American Enterprise Institute. "The situation is they are losing gobs of money, up to $400 billion in mortgages," Wallison said in a Bloomberg Television interview. How Worthless Can They Be? Fannie Mae (FNM) and Freddie Mac (FRE), the unholy devourers of taxpayer money in service of liberals' utopian visions of letting people with low incomes own homes they can't afford, are to be delisted from the New York Stock Exchange because of stock prices trading under $1 per share for more than 30 trading days. This despite the fact that the two have swallowed more than $145 billion of taxpayer money with expectations for further losses ranging from $160 billion to $1 trillion more, according to a must-read Bloomberg News article. Both stocks fell a further 40% on Wednesday morning [6/16/2010] in response to the news. Where Is the Mainstream Media Coverage of Fannie and Freddie? What is $150 billion really worth? It's enough to buy each and every NFL franchise about five times. Or it could pay the median household income more than 3 million times over in the United States. It could even pay for 500 days of the war in Afghanistan at $300 million a day. But it doesn't buy much media coverage when that $150 billion is misspent by our own government and paid for by the increasingly over-stretched taxpayers. The Community Reinvestment Act / ACORN / Affirmative Action Top Banker Says Government Caused Housing Crisis. 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. Clinton Added Teeth To CRA, Obama Turned Them Into Fangs. Despite new evidence the Community Reinvestment Act led to riskier lending and played a key role in the subprime mortgage crisis, the Obama administration is broadening the anti-redlining regulation's authority and scope, spooking bankers. A recent study by the National Bureau of Economic Research, the nation's pre-eminent economic research group, states that the CRA "clearly" had a major impact on the flood of subprime loans made in the late 1990s and 2000s, which directly led to the housing crisis. New Study Finds CRA 'Clearly' Did Lead To Risky Lending. Democrats and the media insist the Community Reinvestment Act, the anti-redlining law beefed up by President Clinton, had nothing to do with the subprime mortgage crisis and recession. But a new study by the respected National Bureau of Economic Research finds, "Yes, it did. We find that adherence to that act led to riskier lending by banks." The Brass Standard. Bill Clinton's own administration, more than any other, promoted an unsustainable housing boom, which eventually and inevitably led to a housing bust that brought down the whole American economy. Behind all the complex financial processes that reached to Wall Street and beyond, there is one fundamental fact: many people stopped making their mortgage payments. Why did that happen? Because mortgage loans were made to people who did not meet the long-established qualification standards for getting a mortgage loan. And why did that happen? Because the Clinton administration threatened lawsuits against lenders who did not approve mortgage loans to minority applicants as often as to white applicants.Subprime Bubble: Obama 'Vampire Socialism' Built It. Previously unpublished court documents reveal that as a young lawyer from Chicago, President Obama's lawsuit against big banks started inflating the housing bubble that created the mess he says he inherited. So Obama Inherited a Mess, Did He? From Whom? Even the most virulent anti-Obama partisans will admit that Barack Obama didn't directly create the 2007-2008 financial meltdown. But Obama's own claims that it was all the fault of his predecessor, George W. Bush, sounded a little thin the first time he uttered them, while now they appear remarkably transparent. The source of the financial crisis precedes Bush by a number of years, and like many landslides, it starts with a small pebble being dropped that starts the whole thing. Housing Arsonist Clinton Now Portrayed As Heroic Firefighter. History has rarely seen anything as surreal as former President Clinton riding into Charlotte as a hero rescuing America and President Obama from failed Republican economic policies. Clinton was the architect of the financial crisis, yet he was able to use the Democratic National Convention to polish his phony credentials as economic genius. Obama EPA Fuel Efficiency Standard Will Eliminate Half of U.S. New Car Buyers. We have all come to realize that Liberal's socialist utopia driven policies and edicts generally enact the "Law of Unintended Consequences," such as the then, little-noticed 1995 Clinton-era CRA regulations that required banks to give mortgages to low income people in high risk neighborhoods. The stated goal was noble — to increase home ownership in America. However, what we got was the "Sub-Prime Mortgage Crisis," an Armageddon-like mass meltdown of the residential real estate and financial markets beginning in 2006. Over $8 trillion in stock market equity rapidly evaporated, along with trillions of dollars in home market values, leaving 50% of American homeowners with no or negative equity ("underwater"), and foreclosure rates of up to 33% in some areas. HUD Scandals: The Cisneros Years. [Scroll down] The CRA was passed in 1977 and updated in 1995 to pressure lenders into making more loans to moderate-income borrowers by allowing regulators to deny merger approvals for banks with low CRA ratings. Even complaints brought by activists, such as the leftist group ACORN, were now counted against a bank's CRA rating. The result was that banks began issuing more loans to otherwise uncreditworthy borrowers while purchasing more CRA mortgage-backed securities. Alice in Liberal Land. In the world of Liberal Land, you can just take for granted all the benefits of the existing society, and then simply tack on your new, wonderful ideas that will make things better. For example, if the economy is going along well and you happen to take a notion that there ought to be more home ownership, especially among the poor and minorities, then you simply have the government decree that lenders have to lend to more low-income people and minorities who want mortgages, ending finicky mortgage standards about down payments, income and credit histories. That sounds like a fine idea in the world of Liberal Land. Unfortunately, in the ugly world of reality, it turned out to be a financial disaster, from which the economy has still not yet recovered. Nor have the poor and minorities. It's The CRA, Stupid! Starting in the mid-1990s, in a major switch, regulators no longer enforced traditional lending rules. Prudent underwriting was deemed racist and banks were judged on how "flexible" they could be in qualifying "nontraditional" credit cases. The more they bent their old rules and the more lower-income minority borrowers they rubberstamped for loans, the better they did on their all-important CRA examinations. In the run-up to the crisis, boosting minority home ownership became the goal of the U.S. government. And incredibly, lowering mortgage-underwriting standards to achieve that goal became government policy. Best Opportunity for America in 50 Years. The media is pretty silent about this, but the real estate crisis which has plagued us for the past 3 years and will hang over us for the next few was caused and promoted by none other than the U.S. government. In an effort to get poor people into housing, the government coerced banks into giving loans to people who would never qualify under other circumstances. They did this by threatening banks with loss of their charters if they did not make more loans to minorities. The New Science of Perfect Hindsight. Americans of all stripes are reeling from the jaw-dropping findings issued by the Financial Crisis Inquiry Report last week. According to this fearless bipartisan commission, the 2008 financial meltdown could have been avoided! Utilizing the most sophisticated research techniques known to man, the commission has determined that toxic subprime mortgages helped set the debacle in motion, as did the widespread abuse of leverage and regulatory lapses on a massive scale. Inadequate management oversight also may have played a role. Bubbles, Bubbles Everywhere. The 2008 financial crash originated with a housing bubble. Not long ago, the cheap money policies of the Federal Reserve, the infusion of trillions of dollars in new foreign investment, and the misguided policies of Freddie Mac and Fannie Mae all conspired to extend to millions of Americans lots of easy cash for inflated houses that they could hardly afford. Owning a house was seen as a "right" rather than the just rewards of household sacrifice, delayed gratification and budgetary discipline. Redline The CRA. Community Reinvestment Act lobbyists are making wild demands to expand the anti-redlining rule that fed the subprime bubble. Even crazier, they may just get their way. Son Of CRA: The Scandal Lives On. Changes that the Clinton administration made to the Community Reinvestment Act bent underwriting rules, paving the way for the easy-credit boom and bust. Now come hearings to expand the CRA. Repeal CRA, stop blackmailing banks. Rep. Jeb Hensarling, R-Texas, has introduced legislation to repeal the 1977 Community Reinvestment Act, a damaging relic from Jimmy Carter's presidency. The CRA empowered left-wing activist groups like ACORN and the Greenlining Institute to use claims of racism to force banks and other financial institutions to make loans and mortgages on the basis of the ethnic and demographic makeup of neighborhoods instead of the creditworthiness of borrowers. ACORN's Fingerprints on Mortgage Crisis Appeared 20 Years Ago. ACORN has been fairly criticized for its actions that led up to the mortgage crisis, which culminated in a huge rash of foreclosures last year. While the tide appears to be waning, it's a problem that is still occuring. Specifically, ACORN strong-armed banks and worked with members of Congress, such as Barney Frank, to weaken credit standards in order for banks, as well as Fannie Mae and Freddie Mac, to fund risky mortgages. Mortgages, of course, that stood little chance of ever being paid, as we witnessed last year. How ACORN destroyed the housing market. Over at the Wall Street Journal, there's a very interesting article that connects the dots between ACORN, the mortgage-lending-standard-destroying Community Reinvestment Act legislation, Fannie Mae and the eventual inflation and collapse of the housing bubble in last decade. O's Dangerous Pals. What exactly does a "community organizer" do? Barack Obama's rise has left many Americans asking themselves that question. Here's a big part of the answer: Community organizers intimidate banks into making high-risk loans to customers with poor credit. In the name of fairness to minorities, community organizers occupy private offices, chant inside bank lobbies, and confront executives at their homes — and thereby force financial institutions to direct hundreds of millions of dollars in mortgages to low-credit customers. Dems push expanded Community Reinvestment Act; deny Act's role in mortgage meltdown. A number of experts believe that aggressive enforcement of the 1970s-era Community Reinvestment Act contributed to the mortgage meltdown, and thus to the greater financial crisis, by requiring financial institutions to lend to unqualified borrowers. Now, the Democratic majority in the House of Representatives is responding to that situation by proposing to expand the scope and power of the Community Reinvestment Act. Act From Which An Acorn Grew, And An Economy Died, Lives On. Acorn found its way into the mortgage business through the Community Reinvestment Act, the 1977 legislation that community groups have used as a cudgel to force lenders to lower their mortgage underwriting standards in order to make more loans in low-income communities. Often the groups, after making protests under CRA, were then rewarded by banks with contracts to act as mortgage counselors in low-income areas in return for dropping their protests against the banks. The Minority Mortgage Meltdown: How The Community Reinvestment Act Fits In. The mortgage fiasco devastating America's big banks has many causes, but perhaps the least understood is the complex impact of the 1977 Community Reinvestment Act (CRA). There has been some hoopla over the CRA in recent months, but nobody seems to have noticed the subtle way the CRA actually exacerbated the disaster. Truth In Lending. A new congressional report details how government politicized housing, wrecking the economy. Rep. Darrell Issa of California, ranking Republican on the House Oversight and Government Reform Committee, has released a report that every American should read. The analysis details how powerful Democrats in Congress insisted that government-subsidized housing be geared to serve the purposes of social justice at the expense of sound lending. ACORN's Food Stamp Mortgages: In a circa 1999 document, "To Each Their Home: Success Stories from the ACORN Housing Corporation," the ACORN affiliate called the American Dream a sham and bragged about undermining banks' underwriting standards. ... ACORN Housing took credit for developing "several innovative strategies" to get around pesky traditional lending guidelines, which were unfair because they "were geared to middle class borrowers." Instead of using passé measures of creditworthiness such as, say, credit history and having an adequate income, ACORN convinced lenders to adopt "more flexible underwriting criteria that take into account the realities of lower income communities." Henceforth, some banks serving inner cities would accept "less traditional income sources such as food stamps." Stop Covering Up And Kill The CRA. The Community Reinvestment Act is to blame for the financial crisis, but it so powerfully serves Democrats' interests that they'll do anything to protect it -- including revising history. Who caused the global economic crisis? The original Community Reinvestment Act was signed into law in 1977 by Jimmy Carter. Its purpose, in a nutshell, was to require banks to provide credit to "under-served populations," i.e., those with poor credit. ... It forced banks to issue something on the order of $1.5 trillion in sub-prime mortgages. $1.5 trillion, i.e., one and a half thousand billion dollars in sub-prime, i.e., risky, mortgages, in order to push this latest example of social engineering. But wait: how did it force banks to do this? Easy. Introduce a federal requirement that banks make the loans or face penalties. The True Origins of This Financial Crisis: Two narratives seem to be forming to describe the underlying causes of the financial crisis. One, as outlined in a New York Times front-page story on Sunday, December 21, is that President Bush excessively promoted growth in home ownership without sufficiently regulating the banks and other mortgage lenders that made the bad loans. The result was a banking system suffused with junk mortgages, the continuing losses on which are dragging down the banks and the economy. The other narrative is that government policy over many years — particularly the use of the Community Reinvestment Act and Fannie Mae and Freddie Mac to distort the housing credit system — underlies the current crisis. The stakes in the competing narratives are high. The diagnosis determines the prescription. Fannie and Freddie Amnesia. Now that nearly all the TARP funds used to bail out Wall Street banks have been repaid, the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac stand out as the source of the greatest taxpayer losses. The Congressional Budget Office has estimated that, in the wake of the housing bubble and the unprecedented deflation in housing values that resulted, the government's cost to bail out Fannie and Freddie will eventually reach $381 billion. That estimate may be too optimistic. Capitalism didn't kill the banks — socialism did. Amid all the myriad analyses of the financial collapse, one sole premise commands universal assent: the crisis originated in the sub-prime mortgage meltdown in America. If we establish what caused that, we shall have discovered the root of the banking crisis. Well, that is easy: ... it was Bill Clinton and his cronies, with their politically correct affirmative action. That is the fact of the matter — the Clinton administration compelled the banks to lend to minorities, to comply with racial and social quotas that defied all the rules of banking. Obama and "The Left": Although Senator Barack Obama has been allied with a succession of far left individuals over the years, that is only half the story. There are, after all, some honest and decent people on the left. But these have not been the ones that Obama has been allied with — allied, not merely "associated" with. ACORN is not just an organization on the left. In addition to the voter frauds that ACORN has been involved in over the years, it is an organization with a history of thuggery, including going to bankers' homes to harass them and their families, in order to force banks to lend to people with low credit ratings. ACORN: Who Funds the Weather Underground's Little Brother? The Association of Community Organizations for Reform Now (ACORN) has become America's most prominent left-wing community group. Little-known until now, ACORN has played a major role in the subprime mortgage mess that has undermined Americans' support for free market problem-solving and set off a worldwide chain of financial troubles. It is also implicated in vote fraud schemes from coast to coast. ACORN aims to give America change that socialists can believe in — by any means necessary. Social engineers are bad bankers. In 1772, the collapse of the Ayr Bank led to the Edinburgh banking crisis of that year. Only three of Edinburgh's 30 private banks survived. Adam Smith commented that "the operations of this bank seem to have produced effects quite opposite from what was intended". ... The collapse of the Ayr Bank tells us much about the present crisis. Community Reinvestment Act: The Risk of Unintended Consequences. As policymakers consider ways to address the current mortgage crisis, it is important to evaluate new proposals with an eye toward their future effects on the economy. The unintended consequences of government programs can have far-reaching economic and social effects. ... A prime example of a public program gone awry — and one of the key causes of the current credit crisis — is the Community Reinvestment Act (CRA). The CRA Scam and its Defenders. "Liberal" economists are overjoyed by the bursting of the housing bubble, for it provides them with what they believe is another "market failure" story. "Most analysts see the sub-prime crisis as a market failure," Robert Gordon gleefully declared in the April 7 online edition of The American Prospect magazine, edited by Robert Kuttner. Gordon does not define what an "analyst" is, and does not cite any survey to support his claim. One suspects that his opinion is based on an informal survey of his like-minded, left-wing friends. Obama and Acorn. Acorn uses various affiliated groups to agitate for "a living wage," for "affordable housing," for "tax justice" and union and environmental goals, as well as against school choice and welfare reform. It was a major contributor to the subprime meltdown by pushing lenders to make home loans on easy terms, conducting "strikes" against banks so they'd lower credit standards. But the organization's real genius is getting American taxpayers to foot the bill. They Gave Your Mortgage to a Less Qualified Minority. Instead of looking at "outdated criteria," such as the mortgage applicant's credit history and ability to make a down payment, banks were encouraged to consider nontraditional measures of credit-worthiness ... Threatening lawsuits, Clinton's Federal Reserve demanded that banks treat welfare payments and unemployment benefits as valid income sources to qualify for a mortgage. That isn't a joke — it's a fact. When Democrats controlled both the executive and legislative branches, political correctness was given a veto over sound business practices. The Financial Mess: How We Got Here. The Community Reinvestment Act was pushed hard by Bill Clinton, although it originated under Jimmy Carter. Asked about it the other day on one of the morning TV talk shows, Clinton said times back then were different. Fannie and Freddie had lots of money and he (in his infinite wisdom) decided that the money should not go to share holders or to executive compensation, but should be used to put the poor into homes. As you can imagine, wonderful things happen when the government strong arms corporations as to how they should spend their money and, better yet, how they should assess the qualifications of home buyers. U.S. mess started with Carter. The story is one of unintended effects. And politicians who unleashed it have remained in full throttle of denying responsibility. The origin of the crisis goes back to 1977 when then president Jimmy Carter signed into law the Community Reinvestment Act (CRA) passed by the Democratic-controlled Congress. The CRA required, as the U.S. Federal Reserve Board notes, "depository institutions to help meet the credit needs of the communities in which they operate, including low and moderate income neighbourhoods, consistent with safe and sound operations." In other words, by law lending institutions were instructed to provide money as mortgages and commercial loans to underserved communities of mostly low income Afro-Americans and underprivileged minorities with poor credit history. What Caused Our Economic Crisis? The housing bubble caused it. What caused the housing bubble? Sub-prime mortgages, risky mortgages, to low-income, bad-credit borrowers. Where did they come from? The "Community Reinvestment Act". President Jimmy Carter and the Democrats passed it in back in 1977. It gave incentives to help low-income borrowers get a home. Not a bad idea — if done right. It helped a little, but only a little — until 1995. The Clinton Administration and the Democrats in power added massive new provisions to authorize — require — sub-prime loans be made. The revisions went further, by allowing the securitization of CRA loans containing sub-prime mortgages. Financial Affirmative Action: After [the Community Reinvestment Act] came into effect, Saul Alinsky-inspired "community organizer" groups such as Greenlining, ACORN, and National Council of La Raza got into the shakedown business. They preach the hateful class-warfare rhetoric of their fellow community organizers Jeremiah Wright, Jesse Jackson, Al Sharpton, and Michael Pfleger. They rage against capitalism and demand crushing taxes and aggressive wealth redistribution programs. They demand more government spending on social programs, a higher minimum wage, and gun control. Jesse Jackson Sr. Denies His Own Involvement Shaking Down the Banks. At a speech at Claremont McKenna to honor Martin Luther King Jr. in mid-January, the subject of Jesse Jackson Sr.'s new ire was the "banksters" — Wall Street fat cats, who are causing all of our problems. Naturally, Jackson ignored his own role in housing crisis. From a little ACORN. ACORN stands for the Association of Community Organizations for Reform Now, a busy hive of left-wing agitation and "direct action" that claims chapters in 50 cities and 100,000 dues-paying members. ACORN is where 1960s leftovers who couldn't get tenure at universities wound up. That the bill-writing Democrats remembered their pet clients during such an emergency speaks volumes. This attempted gift to ACORN (stripped out of the bill after outraged howls from Republicans) demonstrates how little Democrats understand about what caused the mess we are in. No one's clean in this mess. The one man who truly tried to treat this crisis like a crisis — McCain — was ridiculed by Senate Majority Leader Harry Reid, who implored him to come to Washington to help in the first place. And the news media, which now treat any Republican action that threatens a Barack Obama victory as inherently dishonorable, uncritically accepted the bald Democratic lie that McCain ruined a bipartisan bailout deal last Friday. Obama, Voter Fraud & Mortgage Meltdown. Which community activist/political organization in the United States is the largest, most radical left, and most untrustworthy? The answer is ACORN, which bills itself as the nation's largest community organization for the rights of low- and moderate-income families. Its hidden agenda, however, is to change the form of the U.S. government from a republic to a socialist oligarchy, using class warfare and the aid of radical liberals within the Democrat Party. This hidden agenda explains why the liberal newsmedia go mute on Obama's ACORN ties. Obama shields ACORN from Criminal Prosecution in the Economic Crisis. Not only did Senator Barack Obama's presidential campaign pay more than $800,000 to a front of the Association of Community Organizations for Reform; now, ACORN, currently under investigation in a dozen States for voter registration fraud and bribery schemes, for "get-out-the-vote-efforts"; Obama co-sponsored legislation called the "Helping Families Save their Homes in Bankruptcy Act of 2007" — that was supported by ACORN and protects them. Before the ACORN Sprouts into a Tree. As significant as the Ayers allegations are, as set forth by Stanley Kurtz in the Wall Street Journal ... the Acorn allegations may be even more significant, going to the heart of American democracy and the world economic crisis. ACORN's Senator. Barack Obama wasn't just the second-largest recipient of Fannie Mae and Freddie Mac political contributions. He was also the senator from ACORN, the activist leader for risky "affirmative action" loans. More about Obama and ACORN. Good Intentions Paved The Road To Subprime-Stoked Meltdown. For those looking for a real start to today's financial meltdown and government rescue, you need to go back — way back — to 1977, and the Jimmy Carter presidency. How A Clinton-Era Rule Rewrite Made Subprime Crisis Inevitable. One of the most frequently asked questions about the subprime market meltdown and housing crisis is: How did the government get so deeply involved in the housing market? The answer is: President Clinton wanted it that way. Fannie Mae and Freddie Mac, even into the early 1990s, weren't the juggernauts they'd later be. While President Carter in 1977 signed the Community Reinvestment Act, which pushed Fannie and Freddie to aggressively lend to minority communities, it was Clinton who supercharged the process. After entering office in 1993, he extensively rewrote Fannie's and Freddie's rules. Rescuing ACORN: One of the sticking points in resolving the crisis was a poison pill in the Dodd/Paulson compromise that would move 20% of profits from the bailout into the Housing Trust Fund, a slush fund for political action groups such as ACORN (the Association of Community Organizations for Reform Now) and the National Council of La Raza. ... Groups such as ACORN and La Raza lobby to secure government-funded services for their members and seek to move them to the voting booth. O's Dangerous Pals: The seeds of today's financial meltdown lie in the Commu nity Reinvestment Act — a law passed in 1977 and made riskier by unwise amendments and regulatory rulings in later decades. CRA was meant to encourage banks to make loans to high-risk borrowers, often minorities living in unstable neighborhoods. That has provided an opening to radical groups like ACORN (the Association of Community Organizations for Reform Now) to abuse the law by forcing banks to make hundreds of millions of dollars in "subprime" loans to often uncreditworthy poor and minority customers. An ACORN Falls from the Tree. I have unapologetically criticized Republicans, some by name, for out-of-control spending, lack of accountability, and other inexcusable actions that have tarnished the GOP and disserved the nation. And there are other issues that are either both parties' fault, or no one's fault. But here, the Democrats are squarely to blame. They have resisted all attempts at reforming Fannie and Freddie, and pushed those organizations to become ever more reckless in their policies. Fannie Mae Strong-Arm Monitoring of Race. All the talk about the Community Reinvestment Act, the involvement of ACORN and the clear emphasis on developing minority home-ownership frankly comes as a surprise to me. Having grown up in and begun my career in Detroit, I was accustomed to having a large percentage of my business come from the black community. I assumed I was just getting more of the same. In hindsight, a series of conversations I had with representatives from Countrywide has become illuminating. Obama, ACORN & Their Starring Role in the Mortgage Crisis. Barack Obama, congressional Democrats and Progressive-Left operatives — with the help of the mainstream media — have done a great job of spinning culpability for the mortgage crisis onto the Bush Administration, congressional Republicans and, in particular, John McCain. This is a notable moment in the history of political spin because as the facts present, Democrats and Progressive-Leftists — not Republicans — are the ones directly responsible for the current financial crisis in which our country is embroiled. At the center of this culpability are Barack Obama and ACORN, the Association of Community Organizations for Reform Now. Old Soviet-era jokes have become disturbingly applicable to the U.S. After the number of "caring," bleeding-heart politicians in Washington reached a critical mass, it was only a matter of time before the government started ordering banks to help the poor by giving them risky home loans through community organizers. Which resulted in a bigger demand, which resulted in rising prices, which resulted in slimmer chances of repaying the loans, which resulted in more pressure on the banks, which resulted in repackaging of bad loans, which resulted in a collapse of the banks, which resulted in a recession, which resulted in many borrowers losing their jobs, which resulted in no further mortgage payments, which resulted in a financial disaster, which resulted in a worldwide crisis, with billions of poor people overseas — who had never seen a community organizer, nor applied for a bad loan — becoming even poorer than they had been before the "progressives" in the U.S. government decided to help the poor. The Truth Behind the Financial Crisis: Want to know the true source of the financial meltdown in the home mortgage industry leading to the collapse of Fannie Mae and Freddie Mac and today's attendant financial crisis? Follow the money trail back about nine years. Check out this article from the September 30, 1999 edition of the New York Times. ... "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." More questions about the government's role in the financial crisis. The role of the FHA is particularly difficult to fit into the narrative that the left has been selling. While it might be argued that Fannie and Freddie and insured banks were profit-seekers because they were shareholder-owned, what can explain the fact that the FHA — a government agency — was guaranteeing the same bad mortgages that the unregulated mortgage brokers were supposedly creating through predatory lending? The answer, of course, is that it was government policy for these poor quality loans to be made. Since the early 1990s, the government has been attempting to expand home ownership in full disregard of the prudent lending principles that had previously governed the U.S. mortgage market. Government made the mess. Now clean it up. When Rep. Barney Frank, D-Mass., declared last year that "the private sector got us into this mess," he offered a solution: "The government has to get us out of it." Neither claim was true, of course, but that's the point. In order to maintain the illusion that the Obama administration can deliver an economic recovery, the role of government in causing the crisis in the first place must be obscured. What's Next for the CRA? An ambitious plan to update the Carter-era Community Reinvestment Act that supporters hope to see signed into law in 2010 comes amid charges that this legislation was responsible for nothing less than the subprime crisis and the resulting collapse of the residential real estate market. The next wave approaches: Holder's Justice Department bullying banks. A cadre of racialists bent on achieving social justice via reparations from banks to minority communities has been installed by Eric Holder in the Department of Justice. They are using legal bullying tactics to intimidate banks into once again loaning mortgage money to people who have no ability to pay it back. Banks have even been forced to post signs in the facilities informing customers that welfare payments can count as income to apply to mortgage applications. Holder Launches Witch Hunt Against Biased Banks. In what could be a repeat of the easy-lending cycle that led to the housing crisis, the Justice Department has asked several banks to relax their mortgage underwriting standards and approve loans for minorities with poor credit as part of a new crackdown on alleged discrimination, according to court documents reviewed by IBD. Prosecutions have already generated more than $20 million in loan set-asides and other subsidies from banks that have settled out of court rather than battle the federal government and risk being branded racist. An additional 60 banks are under investigation, a DOJ spokeswoman says. Treasury Secretary Paulson Treasury May Bail Out Credit Card, Other Loan Industries, Paulson Says. Treasury Secretary Henry Paulson on Wednesday [11/12/2008] announced that the federal government no longer plans to buy troubled mortgage-related assets from private banks but will expand the scope of its Troubled Asset Relief Program (TARP) to include non-bank financial and credit institutions. Hank Paulson, Naked Emperor. Treasury Secretary Hank Paulson finally confirmed what lonely bailout opponents tried to tell the American public all along: The man doesn't know what the [heck] he's doing. ... The pulled-out-of-the-posterior "$700 billion" price tag has ballooned into the trillions. The "mortgage industry rescue" has expanded to banks, insurance companies, automakers, credit card companies and possibly the entire national volume of consumer lending. Oh, and that vaunted "TARP" component, Paulson admitted this week, is nothing but a four-letter word that rhymes with TRAP. Media Should Demand Paulson's Head. Paulson, former CEO of Goldman Sachs, is not only rich; he is supposed to be smart. Our media were surprised by his turnaround. Some are now questioning his credibility and competence. They should go further and demand his resignation. The plan was to buy troubled assets. Then the money was used to buy shares in banks. Now it's going to be used to support financial institutions offering consumer credit. Democrats in Congress want some of the money to go to the auto industry. Hurricane Hank Plans to Strike Again. Probably the worst U.S. Treasury Secretary of all time, Henry Paulson, now wants to try and revive the housing market by forcing banks to cut interest rates on mortgages. Paulson should quit now. There's no telling how much more damage he could inflict on the economy before President Bush leaves office on January 20. The 10 Dopiest Business and Economy Leaders of 2008: [#2] The bailout trio. Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke, and New York Federal Reserve President Timothy Geithner decided to let Lehman Brothers fail in September, triggering a global collapse of financial confidence, as well as wrecking the money and commercial paper markets. The move also led to massive hedge fund redemptions, which forced them to liquidate stocks. And don't forget the ever evolving $700 billion Paulson plan to bail out the banks. One stimulus for sale. Remember back in October when then Treasury Secretary Hank Paulson said he had to have $700 billion — TODAY — to thaw a liquidity freeze that would prevent banks from lending? Congress haggled but gave Paulson the money in two $350 billion chunks. Paulson wanted to buy up bad assets, primarily mortgages, but changed his mind two weeks later. Instead, capital would be infused with loans and direct purchases, and the banks would use that money to start making loans again. That plan didn't work out. Instead of making loans, the banks simply kept the money (primarily to improve their balance sheets). Last week, the chairman of the bailout oversight committee told Congress the Treasury paid $78 billion more for the securities they bought than what they were worth. In other words, the banks suckered Paulson and Congress. Obama's Pitchforks: Start with the $700 billion bailout of the banking industry last October, featuring the hysterical shrieking of the Secretary of the Treasury. Former Goldman Sachs CEO Henry Paulson's hysterical behavior caused the bottom to fall out of the markets. Business froze. People were transfixed. What did he say? The system is crashing? I don't see that in my business. Two weeks later they did as wallets slammed shut all over the world. Republicans "Homeownership is central to the American dream, and Republicans want to make it more accessible for everyone. That starts with access to capital for entrepreneurs and access to credit for consumers. Our proposals for helping millions of low-income families move from renting to owning are detailed elsewhere in this platform as major elements in Governor Bush's program for a New Prosperity." |
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