The Real Culprits In This Meltdown

IBD Editorials ^ | September 15, 2008

[Kaslin]

Big Government: Barack Obama and Democrats blame the historic financial turmoil on the market. But if it's dysfunctional, Democrats during the Clinton years are a prime reason for it.

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Obama in a statement yesterday blamed the shocking new round of subprime-related bankruptcies on the free-market system, and specifically the "trickle-down" economics of the Bush administration, which he tried to gig opponent John McCain for wanting to extend.

But it was the Clinton administration, obsessed with multiculturalism, that dictated where mortgage lenders could lend, and originally helped create the market for the high-risk subprime loans now infecting like a retrovirus the balance sheets of many of Wall Street's most revered institutions.

Tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making. It was either that or face stiff government penalties.

The untold story in this whole national crisis is that President Clinton put on steroids the Community Redevelopment Act, a well-intended Carter-era law designed to encourage minority homeownership. And in so doing, he helped create the market for the risky subprime loans that he and Democrats now decry as not only greedy but "predatory."

[T. Buzzard Trueblood]

the Community Redevelopment Act, a well-intended Carter-era law

I knew Carter had to have something to do with this mess...

[singfreedom]

This is PRECISELY what my sister, a real estate attorney has said. She's predicted this for years now. We've only been waiting for the affirmation.

According to Sis, lenders were totally FORBIDDEN to throughly vette loan applicants to such an extent that folks could, almost, walk into a loan office and simply “request” a loan of any amount, regardless of income-—and get it! There are some REAL horror stories out there and the blame belongs squarely at Clinton's door.

[singfreedom]

From what I heard, they are under investigation. Is that true?

[publiusF27]

While government arguably has a role in helping low-income folks buy a home, Clinton went overboard by strong-arming lenders with tougher and tougher regulations, which only led to lenders taking on hundreds of billions in subprime bilge.

A little political manipulation will always grow into full blown looting.

[dirtboy]

So, Instead of trying to see if any political milk can be squeezed out of the dead sub-prime cash cow... Let's just move on and try to ensure this never happens again, shall we?

Shhh ... everyone is too busy either trying to position this for political advantage, or giving themselves a hernia trying shoehorning this fiasco into their preconceptions. In my experience, a mess like this is a bipartisan team effort, and it will only be reformed once that it realized and acted upon.

[conservatism_IS_compassion]

Market failure? Hardly. Once again, this crisis has government's fingerprints all over it.

Thank you, President Clinton.

Thank you for 911, China Gate and all the other scandals that will prove your evil/corrupt/treasonous legacy, (the full impact of which has not been realized yet), but one by one will come to full realization, someday soon.

Hear, hear!

And I'll tell you about another government failure. It is the failure, which in the case of President Bush is a virtue adhered to to a fault, to tell the truth about the Democrats generally and the Clinton Administration in particular.

It is a failure of John McCain that he promotes getting along with such as Clinton as his so-called "virtue" of bipartisanship when in fact the public interest cries out for effective opposition to fraudulent Democrat policies.

Are you listening, Sarah? You and Senator McCain make much of your courage in opposing venality in your own party, and and we love you for it. But given the reality (which is plain as the nose on your face, with all the "gotcha" stuff that Big Journalism has been throwing at you personally) that journalism has since the advent of the Associated Press been the actual source of a massive leftist propaganda campaign,

it takes more courage to attack venality in the Democratic Party

than it does to criticize Republicans.

The Right to Know

[conservatism_IS_compassion]

Bookmarked.

[Earthdweller]

"....it takes more courage to attack venality in the Democratic Party ....than it does to criticize Republicans."

The monopoly of fear politics is almost complete...

[cschroe]

Frankly, the real culprit in all of this is GREED. Greed by the financial houses, greed by the mortgage lenders, greed by the consumers. Ye cannot serve God and mammon.

[SBprone]

This thread is remarkable in that most everyone who has posted is being misled by their ideological bias into seeing leftist culprits as the originators of the financial crisis.

The cause of the crisis as far as I can tell is a confluence of powerful and perverse financial incentives that motivated millions of people to do the wrong thing in pursuit of their own financial interests.

Namely:

Mortgage borrowers in pursuit of more cash than they ever dreamed they could get from their collateral.

Home buyers who bought two or three times as much house, in dollar terms, than they ever thought they could afford.

Rental owners who leveraged one or two properties into six or seven and built their real estate empires much faster than they ever dreamed they could.

Mortgage brokers who initiated crazy mortgages with crazy commissions for countless people in the above categories and made five times as much money per year as they ever dreamed possible.

Financial executives and traders who designed and sold collateralized debt obligations by the billions of dollars and made larger profit-based bonuses than they ever imagined they could.

I’m sure this list can be expanded upon. The point is, when so many people at so many different levels of society have a financial incentive to do the wrong thing, and those incentives are all aligned in the same direction, look out. Follow the money is right. And the money wound up in the hands of Democrats, Republicans and people who don’t give a crap about politics at all.

Partisan politics is not the way to model your view of reality, folks.

[E.G.C.]

BTTT

[MileHi]

bump

[IamConservative]

I’m sure this list can be expanded upon. The point is, when so many people at so many different levels of society have a financial incentive to do the wrong thing, and those incentives are all aligned in the same direction, look out.

What do you think is the seed? High liquidity and low interest in the capital markets?

I tend to agree with the rest of your points BTW.

[ladyjane]

Apparently there is an investigation of the accounting practices at Fannie Mae. I’ll try to get more details.
Senator Dole was on the radio yesterday talking about the irregularities. And she was telling about the millions of dollars (over 20 M a year) spent to lobby congress!!! They were to have a hearing about it today but it’s been postponed a couple of days because of the other financial crises.

[T Lady]

*MEGA PING*

[rockinqsranch]

“Partisan politics is not the way to model your view of reality, folks.”

Please read the following linked articles. The first was written early in the first Clinton misAdministration, at the time it was happening:

http://findarticles.com/p/articles/mi_m1282/is_n25_v45/ai_14779796

The second was this past July.

http://www.freerepublic.com/focus/f-news/1965239/posts

These are interesting articles now that the prophecies of the 1993 article seem to be in play.

[PGalt]

Thanks for the ping. HEAR! HEAR!

[GregoryFul]

We the people need to get our hands around the necks of these thiving creeps (Gore Licks name comes up in so many places), confiscate all their ill-gotten gains, and toss them under the jail.

[huldah1776]

I don’t know about this, but it seems to me the rates went down after 9/11 to stabilize everyone’s jitters, then to keep the economy going the lenders took advantage of a time when the feds weren’t going to say no to easy loans, and gave out loans to almost everyone, not only minorities. The real estate brokers also got on the wagon by raising housing prices because of the feeding frenzy. All to keep the economy going because people realized after 9/11 that their credit debt was through the roof, and jobs weren’t going to pay better or might not be there. Everyone is to blame—but not me. I live paycheck to almost paycheck and keep the economy going by spending real money. :) This is a non-economists view.

[Huck]

I think Bush should address the Nation from the Oval Office

He should have been doing that the last 8 years, especially on the subject of the war. But he rarely does Oval Office addresses, and when he does, he's very stiff, his voice gets high pitched, he gets that half nervous look of consternation on his face, and probably ends up worse off than if he'd just skipped it. I wouldn't expect a pep talk from GWB.