- Special Sections
- Public Notices
The economic travails that we are experiencing began with the collapse of the housing market. Sub-prime, low-interest loans to people who lacked sufficient income to make their monthly payments began this tumble into oblivion.
Follow along. The origin of the sub-prime market collapse goes back to 1977, when Carter signed into law the Community Reinvestment Act. It was passed by a Congress even more profoundly liberal than today's.
CRA encouraged banks to extend credit to poor and minority homebuyers, that is, those with a greater risk of not being able to repay the loans. This was poor banking, but the bleeding hearts forced the lending institutions to extend high-risk loans. The Libs are always ready to risk anything if it will result in re-election of their own. The poor folks who bought houses that they were ill equipped to pay for would not forget their friends at election time.
This went on and didn't harm the banks too much until September 1994. The Clinton bunch changed the rules so that the banks would be graded on their compliance with the regulations. A low grade on compliance could cost the banks dearly. It could prevent them from merging with other banks at a time when interstate banking was invaluable, or it could prevent them from opening branch banks.
To avoid such sanctions banks had to provide concrete numbers to federal inspectors of the number of sub-prime loans. Again, poor banking, but very politically correct.
The new rules gave power to left-wing groups like the Association of Community Organizations for Reform Now by giving them a say in how banks could be graded. The groups began extortion tactics by threatening the banks with low grades if they didn't provide loans to those whom the groups wanted.
This was just the beginning. The trend toward mega-mergers of major banks gave the left-wing groups great power over an amazing amount of money by threatening to give the banks poor CRA ratings. The Senate Banking Committee said that $9.5 billion has gone to such groups to pay for services and salaries.
The Bank of New York paid ACORN $760 million. The Bank of America paid $3 billion to a similar group and it goes on and on. Banks soon saw this extortion as the price of doing business. The cost became too high. Bank safety and soundness eroded significantly.
U.S. Sen. Phil Gramm, (R-Texas), sponsored a bill to reform the banks but Clinton threatened a veto and it amounted to nothing.
Bad enough, you might say, but Fannie Mae and Freddie Mac, those two enormous - now failed - government entities made it much worse. CRA got the sub-prime ball rolling; Fannie and Freddie turned it into an industry - with a lot of liberal support.
Barney Frank, the openly homosexual Congressman from Massachusetts, spent years blocking Republican efforts to regulate the banking industry. He now blames the GOP for the failure of Fannie and Freddie.
In 1999, the New York Times reported that Fannie Mae had been under intense pressure from the Clinton Administration to expand mortgage loans among low- and moderate-income people. The road to disaster was being paved by liberal initiatives.
Now taxpayers are picking up the tab for these insane policies - to the tune of hundreds of billions of dollars. Former Vice President Dick Cheney told CNN, "We tried to deal with Fannie and Freddy for some years, but were blocked by Democrats on the Hill - Barney Frank and Chris Dodd."
Liberal claims that they tried to stop the sub-prime fiasco is a complete reversal of the record. After all they have cost us - $8 trillion to date - the least we deserve is the truth.
Adkins lives in Tell City.