I watched this youtube video and followed their links to get the following information for this post.
If people are going to be honest then you have to acknowledge the facts of what that youtube video is saying. What it breaks down to is "class warfare". What is class warfare? That's when the Democrats use the ignorance of the poor to blame the Republicans for everything without providing the facts. In other words: They rely on the poor's lack of an education.
Do your research!
SIMPLY PUT…THE DEMOCRATS ARE RESPONSIBLE FOR THE ECONOMIC CRISIS
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THE ROOTS OF THIS ECONOMIC CRISIS
The Community Reinvestment Act (CRA)
The Community Reinvestment Act (CRA) was established by Congress in 1977 (President Jimmy Carter). The Act requires that deposit-taking financial institutions offer equal access to lending, investment and services to all those in an institution's geographic assessment area-at least three to five miles from each branch. In the case of large banks with many branches, the geographic area may encompass an entire county or even a state.
Before the CRA, many bankers excluded low-income neighborhoods and people of color from their lending products, investments, and financial services - a practice known as "redlining". Community activists coined the term when they discovered that the failure of banks to make loans in some low-income neighborhoods was so geographically distinct, that it was easy to draw red lines on maps to delineate the practices.
In the 1970s, activists in Chicago and across the country brought strong pressure on banks to lend equitably to all those in their communities. Since its passage, the CRA has been used across the United States to win tens of billions of dollars in new lending, investments, and services for communities. The National Community Reinvestment Coalition tracks more than $1 trillion dollars in community reinvestment pledges nationally. These pledges are explicit investments in equitable development goals, and finance many tools in this toolkit.
Original Act
The CRA was passed by the 95th United States Congress and signed into law by President Jimmy Carter in 1977 as a result of national grassroots pressure for affordable housing, and despite considerable opposition from the mainstream banking community. Only one banker, Ron Grzywinski from ShoreBank in Chicago, testified in favor of the act. The CRA mandates that each banking institution be evaluated to determine if it has met the credit needs of its entire community. That record is taken into account when the federal government considers an institution's application for deposit facilities, including mergers and acquisitions after the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 repealed restrictions on interstate banking. However, until 1995 the Act was laxly enforced and banks only were required to advertise in local minority newspapers or sit on the boards of local community groups. The CRA is enforced by the financial regulators (Federal Deposit Insurance Corporation ("FDIC"), Office of the Comptroller of the Currency ("OCC"), Office of Thrift Supervision ("OTS"), and the Federal Reserve System).
The bill encouraged mortgage lending through two government sponsored enterprises ("GSEs"). The Federal National Mortgage Association, commonly known as Fannie Mae, enables mortgage companies, savings and loans, commercial banks, credit unions, and state and local housing finance agencies to lend to home buyers. The Federal Home Loan Mortgage Corporation, commonly known as Freddie Mac, buys mortgages on the secondary market and sell them as mortgage-backed securities on the open market. It also charged the Federal Reserve System to implement the CRA through ensuring banks and savings and loans met their CRA obligations.
Clinton Administration Changes of 1995
In early 1993 President Bill Clinton ordered new regulations for the CRA which would increase access to mortgage credit for inner city and distressed rural communities. The new rules January 31, 1995 and featured: requiring strictly numerical assessments to get a satisfactory CRA rating; using federal home-loan data broken down by neighborhood, income group, and race; encouraging community groups to complain when banks were not loaning enough to specified neighborhood, income group, and race; allowing community groups that marketed loans to target to groups to collect a fee from the banks.
The new rules, during a time when many banks were merging and needed to pass the CRA review process to do so, substantially increased the number and aggregate amount of loans to low- and moderate-income borrowers for home loans, some of which were ‘SUBPRIME LOANS.’ Banks set up CRA departments, a CRA consultant industry was created and new financial-services firms helped banks invest in packaged portfolios of CRA loans to ensure compliance. Established and new community groups began marketing such mortgages. The Senate Banking Committee estimated that as of 2000, as a result of CRA, such groups had received $9.5 billion in services and salaries. As of that time such groups also had received tens of billions of dollars in multi-year commitments from banks, including ACORN Housing $760 million; Boston-based Neighborhood Assistance Corporation of America $3 billion; a New Jersey Citizen Action-led coalition $13 billion; the Massachusetts Affordable Housing Alliance $220 million. The number of CRA mortgage loans increased by 39 percent between 1993 and 1998, while other loans increased by only 17 percent.
Related rule changes gave Fannie and Freddie extraordinary leverage, allowing them to hold just 2.5% of capital to back their investments, vs. 10% for banks. By 2007, Fannie and Freddie owned or guaranteed nearly half of the $12 trillion U.S. mortgage market. Due to massive financial losses, on September 7, 2008 the Federal Housing Finance Agency (FHFA) put Fannie Mae and Freddie Mac under the conservatorship of the FHFA.
Bush Administration Changes of 2005
In 2002 there was an interagency review of the effectiveness of the 1995 regulatory changes to the Community Reinvestment Act and new proposals were considered. In 2003, the Bush Administration recommended that a new Department of the Treasury agency should supervise the primary agents guaranteeing subprime loans, Fannie Mae and Freddie Mac. Congressional support was approximately split along Party lines and the proposal eventually failed.
The new CRA regulations proposed in early 2005 were put into effect in July and September of 2005. They included new definitions for "small" and "intermediate small" banks which were subject to less restrictions than formally. The regulations were opposed by a contingent of Democrats.
The Trillion-Dollar Bank Shakedown That Bodes Ill for Cities
Howard Husock
The Clinton administration has turned the Community Reinvestment Act, a once-obscure and lightly enforced banking regulation law, into one of the most powerful mandates shaping American cities—and, as Senate Banking Committee chairman Phil Gramm memorably put it, a vast extortion scheme against the nation's banks. Under its provisions, U.S. banks have committed nearly $1 trillion for inner-city and low-income mortgages and real estate development projects, most of it funneled through a nationwide network of left-wing community groups, intent, in some cases, on teaching their low-income clients that the financial system is their enemy and, implicitly, that government, rather than their own striving, is the key to their well-being. (That's Class Warfare)
BOTTOM LINE?
It's the Democrats who started this mess and now they're blaming the Republicans? Is that the change that Mr. Obama is preaching?
President Bush, Senator McCain and a huge number of Republicans warned about this economic crisis up to 5 years ago.
The following video link shows the hearings, when Democrats lied about what was going on with Fannie Mae and Freddie Mac. Watch the Black memebers of congress play the race card when Fannie Mae and Freddie Mac's administrators are being called into question over their questionable business policies. That was then and because of that "denial," this financial crisis is what we're facing today.
http://www.youtube.com/watch?v=_MGT_cSi7Rs
The bottomline is this: What does it all mean? It mean that when Mr. Obama uses the phrase: Mr. McCain is tied to the failed Bush economic policies...well, what he's not saying is that it is the Democratic economic policies, especially under President Clinton, that led to this economic crisis.
MR. OBAMA AND THE DEMOCRATS ARE LYING TO THE AMERICAN PEOPLE!
And for what? Power? During this time of economic crisis? They shouldn't be running for President. They should be sent to jail!
mike t.
7 comments:
Even if everything you posted about the CRA under Carter and Clinton were true, who was in the White House for the past 7 1/2 years? And until 2006 who was in the House and Senate? What did the years of deregulation do to benefit our economy?
There's plenty of blame to go around here, but trying to put this entire package on the doorstep of the Democratic Caucus is ludicrous.
According to people who know how the CRA works, it is simply false to claim that the CRA is even a minor cause of our current financial problems. Here are two write-ups on the subject. The second one comes from Ellen Seidman who was formerly the head of the U.S. Office of Thrift Supervision. My suspcision is that she knows a lot more about the subject than right wing pundits.
http://www.prospect.org/cs/articles?article=did_liberals_cause_the_subprime_crisis
First, consider timing. CRA was enacted in 1977. The sub-prime lending at the heart of the current crisis exploded a full quarter century later. In the mid-1990s, new CRA regulations and a wave of mergers led to a flurry of CRA activity, but, as noted by the New America Foundation's Ellen Seidman (and by Harvard's Joint Center), that activity "largely came to an end by 2001." In late 2004, the Bush administration announced plans to sharply weaken CRA regulations, pulling small and mid-sized banks out from under the law's toughest standards. Yet sub-prime lending continued, and even intensified -- at the very time when activity under CRA had slowed and the law had weakened.
http://www.newamerica.net/blog/asset-building/2008/no-larry-cra-didn-t-cause-sub-prime-mess-3210
It has lately become fashionable for conservative pundits (Larry Kudlow, George Will) and disgruntled ex-bankers (Vernon Hill, for example, in his March 7 American Banker editorial) to blame the current credit crisis on the Community Reinvestment Act. This is patent nonsense. The sub-prime debacle has many causes, including greed, lack of and ineffective regulation, failures of risk assessment and management, and misplaced optimism. But CRA is not to blame.
First, the timing is all wrong. CRA was enacted in 1977, its companion disclosure statute, the Home Mortgage Disclosure Act (HMDA) in 1975. While many of us warned against bad subprime lending before the turn of the millennium, the massive breakdown of underwriting and extension of risky products far down the income scale-without bothering to even check on income-was primarily a post-2003 phenomenon. To blame a statute enacted in 1977 for something that happened 25 years later takes a fair amount of chutzpah.
anonymous and anthony,
Thank you for commenting.
It's what Clinton did to the CRA that led to this crisis. Carter's version of the CRA didn't have a huge impact. As the article points out it was Clinton's new regulations to the CRA that opened the door.
"In early 1993 President Bill Clinton ordered new regulations for the CRA which would increase access to mortgage credit for inner city and distressed rural communities. The new rules January 31, 1995 and featured: requiring strictly numerical assessments to get a satisfactory CRA rating; using federal home-loan data broken down by neighborhood, income group, and race; encouraging community groups to complain when banks were not loaning enough to specified neighborhood, income group, and race; allowing community groups that marketed loans to target to groups to collect a fee from the banks."
As for the last 7 1/2 years...well, Clinton's act lead to a false sense of prosperity. It was purely a bubble. And that philosophy is bursting now in the Bush adminstation.
Bush's policies couldn't change what Clinton's new CRA regulations had done. As a matter of fact President Bush warned about the situation and was rejected by the Democrats.
Yes, this economic crisis is squarely on the Democrats. It took time but this is the result of what they did.
Again, thank you for commenting.
mike t.
The CRA didn't cause the housing bubble. The CRA didn't force banks to make sub-prime loans. Fannie Mae and Freddie Mac were not heavily involved in sub-prime loan insurance until near the start of the housing bubble's bursting, and the story below makes it sound like there was some pressure put on them by banks and politicians to prop up the market.
Read about it here
http://www.boston.com/business/articles/2007/06/07/help_for_the_subprime_loan_market/
The attempt to build a logical chain showing that the CRA will lead to Fannie and Freddie insolvancy and to a financial crisis has not been made.
I think most people consider that it wasn't some statute that caused this mess. The problem was over-leveraging, of good loans and bad loans both, and the sheer complexity of securities based on mortgages that made investors doubt that they could be accurately priced once house prices began to fall and some people started defaulting. Complexity and over-leveraging have zip to do with CRA.
And defaults linked to CRA would be a minor proportion, most likely (I don't know, off hand, what proportion: but that onus is on you in order to make your case).
So maybe the CRA invited a small minority of home-owners, abetted by risk-taking banks and lenders, to take out risky loans. Nobody was forced to make those loans though. And nobody was forced to buy mortgage backed securities, in whatever incarnation. Investors could have probed and found them murky and risky. They didn't. Tough cookie.
Complexity and over-leveraging were ignored by Bush and his market regulators, and investors (institutional and small), until a sudden realisation hit all parties.
crf,
Thank you for commenting.
I disagree. That new regulation President Clinton put in the CRA in 1995 says it all.
Even President Clinton mentions it in one of the videos I put up.
That's so funny how you say Fannie and Freddie had very little to do with the economic crisis when they went belly-up and their CEOs walked away with millions upon millions of dollars.
By the way, your link doesn't work.
mike t.
BTW - the reason fannie and freddie walked away with millions was because of the failure of oversight by republicans and rampant deregulation. You can try and continue to say that Clinton is to blame for the current economic downfall. While his policies are partly responsible (republican deregulation policies are to blame as well) at least the CRA was well-intentioned. You suggest that you are a religious and christian man. Why are you so opposed to policies that would help to lift up the common man. That is what clinton was trying to do by restructuring loans. Republicans, on the other hand, used deregulation to benefit the rich.
anonymous,
Thank you for commenting.
You seem to ignore these facts.
Bush Administration Changes of 2005
In 2002 there was an interagency review of the effectiveness of the 1995 regulatory changes to the Community Reinvestment Act and new proposals were considered. In 2003, the Bush Administration recommended that a new Department of the Treasury agency should supervise the primary agents guaranteeing subprime loans, Fannie Mae and Freddie Mac. Congressional support was approximately split along Party lines and the proposal eventually failed.
The new CRA regulations proposed in early 2005 were put into effect in July and September of 2005. They included new definitions for "small" and "intermediate small" banks which were subject to less restrictions than formally. The regulations were opposed by a contingent of Democrats.
anonymous,
These are the fact on the regulations that should have been forced in Fannie and Freddie. Be honest and accept it!
mike t.
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