Clinton Democrats are to blame for the credit crunch

Discussion in 'Current Affairs, News and Analysis' started by Blogg, Oct 2, 2008.

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  1. Now a great many will disagree and no doubt simple greed by banks etc played a huge part but some interesting points here:

    "Let us be clear: this crisis was not caused on Wall Street — it was caused in the White House. The root problem was not financial — it was political, and those truly responsible for this fiasco were not bankers, nor even Bush Republicans; they were Clinton Democrats.

    For generations, America’s bankers have been firmly refusing credit to those they judged unworthy of it. Yet the mountain of toxic subprime debt that has threatened to overwhelm the entire financial system, and the astonishing number of mortgage foreclosures across the United States, is proof that, at some point in the relatively recent past, bankers radically altered their behaviour and began to shower mortgages on borrowers who had no realistic prospect of keeping up their repayments.

    What could possibly have induced them to act so recklessly, and so out of character? The facile answer to that question is greed, the lure of a fast and easy buck. The correct answer is that banks were bullied, cajoled and coerced into lowering their lending standards by politicians in pursuit of an ideological agenda.

    Let’s wind back to 1993 and Roberta Achtenberg’s arrival on the Washington political scene. Achtenberg had made her name in San Francisco as a civil rights lawyer and activist, campaigning to keep open the city’s gay bathhouses, and (I promise I’m not making this up) pressing for an increase in the number of gay Scoutmasters. Bill Clinton offered her a job in his new administration, and Roberta Achtenberg became the first openly lesbian nominee ever to receive a Senate confirmation. She duly took up her post as Assistant Secretary for Fair Housing and Equal Opportunity at the Department of Housing and Urban Development (HUD).

    ....Achtenberg, a member of the kickass school of public administration, was busy setting up a network of enforcement offices across the country, manned by attorneys and investigators, and primed to spearhead an assault on the mortgage banks, bringing suits against any suspected of practising unlawful discrimination, whether on the basis of race, gender or disability. Achtenberg believed racism was a big factor in keeping minorities from enjoying the same level of home ownership as whites.

    She doubted if much could be done to change people’s attitudes on racial matters, but she was confident she, in cahoots with Attorney General Janet Reno, could use the law to change the behaviour of banks.

    However, when little or no overt or deliberate racial discrimination was discovered among the mortgage lenders, HUD’s investigators turned to trying to prove ‘disparate treatment’ of minority groups, a notion similar to that of unintentional ‘institutional racism’. If a bank refused loans to proportionally more black applicants than white ones, for instance, the onus would fall on it to prove it had good grounds for doing so or face settlement penalties running into millions of dollars. A series of highly publicised cases were brought on this basis, starting in 1994.

    Eventually the investigators would turn somewhat desperately to ‘disparate impact’, a form of discrimination so abstract and rarefied as to be imperceptible to its supposed victims, and indeed often only discernible at all through the application of multivariate regression analysis to information stored on regulators’ databases. In fact, by 1995 Achtenberg was actually having to rein in her zealots, issuing a clarification that the use of the phrase ‘master bedroom’ in a property advertisement was, despite its clear patriarchal and slave-owning resonances, not actually an actionable offence under the anti-discrimination laws. "


    http://www.spectator.co.uk/the-magazine/features/2189196/part_3/clinton-democrats-are-to-blame-for-the-credit-crunch.thtml
     
  2. Fair comment, but only one ingredient of the cause. The other half was the bundling and trading of bad debt with good in a way that it made it impossible to differentiate one from the other. Hence nobody actually knew what they were buying and what it was actually worth- but hey, that doesn't matter as long as the price of these derivatives keeps going up, right?
     
  3. known for quite a while, surely?


    in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie ``continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,'' he said. ``We are placing the total financial system of the future at a substantial risk.''

    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSKSoiNbnQY0


    Bill Clinton's former budget director and current Obama advisor Franklin Raines, who served as chairman and CEO of Fannie from 1999 to 2004, pocketed $52 million in pay and bonuses while at the helm. No surprise that Fannie's earnings were overstated by nearly 50% during that time, and subsequently had to be "restated" downwards by $3 billion.

    Then there's Obama supporter Illinois Rep. Rahm Emanuel, who served on Freddie Mac's board after leaving the Clinton White House. There's a lot of taint around Obama from Fannie and Freddie.

    http://news.yahoo.com/s/ibd/20080908/bs_ibd_ibd/20080908general


    In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

    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 pro

    In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

    ''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

    from New York Times Sept. 30th. 1999 as quoted in

    http://www.redcounty.com/orange-county/2008/09/clinton-broke-fannie-and-fredd/

    8O 8O 8O
     
  4. Fingerpointing started already?

    Let's be fair to Clinton and remember 1977 community reinvestment act (CRA).
     
  5. i still havn't decided whether the crises was precipitated by democratic interest, to embarass the republicans, with the presumption of childish stupidity amongst the american electorate and a compliant media, or

    it's been precipitated by republican interest to expose corruption, cronyism, and lack of fiscal probity amongst democrats, with an assumption that the american electorate is not stupid. :wink:

    not that it makes my life any easier...
     
  6. I didn't know about the Obama link, but I did know about the US Law which required lenders to treat Welfare benefits and dole cheques as of equal value to waged applicants.

    In a litigious culture like the US this may prove interesting in years to come.
     
  7. Interfering Government social engineering (Community Reinvestment Act) meets corporate greed and irresponsibility (securitised mortgage products) with disasterous consequences.
     
  8. Hum
    Well Bill may have started the rot,
    But Georgei Boy has been running the shop since 2001.
    I seem to remember Bill left the US of A with the Government finances Booming and well in credit.
    I will suggest that it goes against basic GOP beliefs that a administration should be in the black and not naturally be in the red.
    George started Two Wars.
    Wars are by their nature Very Expensive, and in a Normal world Taxes rise to pay for your new war.
    No new taxes and then Greenspan kept interest rates unnaturally low. People where Fooled into thinking they had More available Capital, due to low repayments, then they really had.
    This is understandable until something else goes wrong.
    Governments have a Duty to run the nations Finance responsibly.
    George used cheap intrest and loans to buy himself a second election.
    john
    And Tone Dear Tone did the same in UK to buy Two elections.
     
  9. That would be those grand GSE's Fannie and Freddie. Given cover for what they were doing by Dodd and Franks.
     
  10. For a Country Gent, in his Dacha, that was a obscure Act to mention there Domo' Old Chap! 8)
     
  11. Oooops you missed Jim Johnson who was picked to vet Obama's running mate and was CEO of Fannie and succeeded by Raines.

    http://en.wikipedia.org/wiki/James_A._Johnson_(businessman)
     
  12. Especially since the CRA of 1995 was far more damaging ;-)
     
  13. The Act might be obscure, but sinister in its consequences: CRA of 1995, mentioned by ctauch, was not a separate Act but a string of amendments to the existing Act of 1977.
     
  14. The CRA issues is a non-starter hyped by right-wing politicians & radio hacks pandering to dimwitted mouth-breathers.

    The facts are that CRA regulated loans defaulted at lower rates than non-CRA regulated sub-prime loans. Non-CRA regulated loans like Ninjas defaulted at far higher rates and account for a majority of the risky sub-prime loans.

    Sub-prime loans that were non-CRA regulated account for the vast majority of defaults.

    This Fed Reserve study stated clearly: On a per program basis, [bank] respondents report that a majority of the CRA special lending programs have low delinquency and charge-off rates.

    You can blame the CRA for opening the door to banks loaning to low-income buyers, you can blame ACORN for idiocy, but non-CRA regulated sub-prime loans took the ball and ran with it.

    The problem wasn't CRA regulated loans but those non-CRA sub-prime loans that parodied CRA's loan availability by making loans available to not only low-income but also non-credit worthy borrowers which CRA regulated banks steered clear of.

    But let's not have facts get in the way, too much complexity makes the simpleton brain hurt.