I wish Rush would knock off the half-baked version of how the subprime bubble developed. He’s stuck on his idea that government regulation, the CRA, was at the root of it all.
Unfortunately for his theory the biggest subprime mortgage writers were entirely free of the CRA and any other regulation for that matter. Laws were passed in the Clinton administration that prohibited regulation of derivatives and which gutted the Glass Steagall Act that had kept investment banks out of retail lending.
all that is true but only with a prior willingness to skim money on the guise EVERYONE must own a home and Dodd and Frnaks did on purpose
this was a devalue America plan straight up
you are just outright WRONG
Jimmy Carter, as bad as he was, did not extend the account coverage of S&Ls from $40k to $100k.
This was done during the Reagan administration, it was the Garn-St Germain Act of 1982.
It was a bright idea of Ferdie St Germain, a Democrat from Rhode Island. Unfortunately for Reagan and the country as a whole old Ferdie was a very slick character and his bill opened the door to all sorts of fraud.
It was a preview of what was to come with the passage of Gramm-Leach-Bliley in 1999 and the Commodities Futures Modernization Act of 2000. It’s little surprise that the housing bubble and mortgage crisis followed these two bills.
So when Clinton told Franklin Raines in ‘98 to loosen eligibility for minorities on loan had nothing to do with the CRA and the collapse of mortgage backed derivatives?
True. Problem is that this is only half the story. The CRA and the push by the Clinton Justice Department was the causation for new types on loans of which subprime was one. The banks that were originally doing to subprimes couldn't keep up with demand and mortgage shops were created out of thin air to fill the void.
Agree with you on derivative regulation and Glass-Stegall. those were bad mistakes but wouldn't have mattered much without the creation of the environment by the CRA. That was the underlying disease and the symptoms were flimsy mortgages, rating agencies, CDO's, credit default swaps, AIG insurance on these instruments, overnight intra-bank lending on these assets, LTCM, Bear Stearns High-Grade Structured Credit Fund, Lehman, etc.
Rush is wrong that this wasn't a very severe crisis. If the fed and Treasury did not step in with TARP and capital injections, the system would have melted down and massive bank runs would have created a financial catastrophe.
Investment banks in retail lending had nothing to do with why the subprime debacle occurred.
The CRA applied to all banks insured by the FDIC which for example Countrywide Credit, the single biggest offender was.