Is it just my conspiracy mind that feels this whole thing is beyond just a person who chose (stupidly) to live above his means -— and banks who allowed it? Who was driving the banks? If Acorn, or the like, was involved — who pressured them? Part of a ‘grand design’?
You STILL haven't heard of the "community re-investment act" which was given birth (along with ACORN) during the Carter Admin, and "beefed up" again during the Clinton admin?
" When the CRA was created during the Carter administration BY DEMOCRATS, the administration also funded with tax dollars numerous "community groups" that have helped the Fed, the Comptroller of the Currency, and other federal regulatory agencies to enforce the act. Under the CRA, if a bank wanted to make virtually any change in its business operations — merging, opening up a new branch, getting into a new line of business — it had to first prove to regulators that it has made "enough" loans to the government's preferred borrowers.
Tax-funded "community groups" like ACORN would threatn to file petitions with regulators that stopped the bank's activities in their tracks, sometimes defeating them altogether, if they didn't loan money to under-qualified minorities. The banks routinely paid off ACORN and other "community groups" by giving them millions of dollars as well as promising to make even more dubious loans to those who didn't qualify for them.
In order to try to diversify the risk of these loans, the Federal Home Loan Mortgage Company ("Freddie Mac") pioneered the "securitization" of bundles of these high-risk loans so that they could be sold on secondary markets. Such "securitization" exploded during the 1990s as a result of government regulation. As Fed Chairman Ben Bernanke himself stated in a March 30, 2007 speech entitled "The Community Reinvestment Act: Its Evolution and New Challenges" (published online by the Fed)
Securitization of affordable housing loans expanded, as did the secondary market for these loans, in part reflecting a 1992 law that required the government-sponsored enterprises, Fannie Mae and Freddie Mac, to devote a large percentage of their activities to meeting affordable housing goals". In 1994 the Riegle-Neal Interstate Banking and Branching Efficiency Act loosened up the regulatory barriers to bank mergers. Consequently, said Bernanke: "As public scrutiny of bank merger and acquisition activity escalated, advocacy groups [like ACORN] increasingly used the public comment process to protest bank applications on CRA grounds." In other words, there was a burst of additional legalized extortion perpetrated by the Fed and its pet "activist organizations" beginning in the mid-1990s. As a result, says Bernanke, "banks began to devote more resources to their CRA programs."
Also in 1995, the [RAT controlled] US Treasury Department created the multibillion-dollar "Community Development Financial Institutions" fund to "provide banks with access [i.e., taxpayers' dollars] to new opportunities to finance community economic development" as "encouraged" by the CRA, said the Fed chairman.
The [RAT] government also "streamlined" the regulatory requirements for CRA loans in 1995, allowing — and indeed pressuring — banks to make such loans without the benefit of many traditional credit-worthiness criteria, such as the size of the mortgage payment relative to income, savings history, and even income verification! Instead, the Fed told banks that participation in a credit-counseling program, many of which are federally funded, could be used as "proof" of a low-income applicant's ability to make his mortgage payments. In other words, federal bank regulators required banks to make bad loans based on nonexistent credit standards.
"In his April 26 New York Post article on the CRA entitled "The Real Scandal," Professor Liebowitz explains how the government's Fannie Mae Foundation singled out one bank in particular as the role model for all other banks in America in terms of its commitment to CRA lending: Countrywide, the nation's largest mortgage lender, had committed to $600 billion in low-income or "subprime" loans as of 2003. Today, Countrywide is essentially bankrupted and has been merged with Bank of America."
The myth that the CRA would not be harmful to bank-industry profits was hidden for years by the Fed-created housing bubble, which allowed for easy refinancing of all the bad debt. "[The] CRA increased lending and homeownership in poor communities without undermining banks' profitability," Robert Gordon proudly proclaims. But now that the bubble has burst, all those unqualified borrowers — whom the government calls "subprime," as though their credit ratings are only a tiny, tiny smidgen below "prime" borrowers with the very best credit ratings — are defaulting on their mortgages in droves.
Bank profitability has been extremely "undermined," to put it mildly. The bursting of the Fed-generated housing bubble is the reason why the CRA scam was not exposed until now, despite having been in operation for some thirty years.