The Obama administration didn’t allow the first mortgage crisis to go to waste. They took control of General Motors and got the Democratic Congress to give them 800 billion dollars to spend however the executive branch wished. It cost workers hundreds of thousands of jobs. It put the party most responsible for the crisis in charge of ending it.
The Community Reinvestment Act, ACORN and the Department of Housing and Urban Development, in consort with Fannie May and Freddie Mac, gave us the housing boom which led naturally to the subsequent bust. They did it by mandating that banks make an an absurdly high level of sub-prime loans. By the time Andrew Cuomo was Secy of H.U.D. under President Clinton, forty percent of mortgage loans were to people with poor credit. It was a house of cards that had to fall unless the rate of sub-prime lending were reduced. Incredibly, Secy. Cuomo insisted that sub-prime lending be increased and put the pressure on the banks to do so.
The same forces are at work to do exactly the same thing all over again.
Bloomberg Businessweek reports:
Community activists in St. Louis became concerned a couple of years ago that local banks weren’t offering credit to the city’s poor and African American residents. So they formed a group called the St. Louis Equal Housing and Community Reinvestment Alliance and began writing complaint letters to federal regulators.
That was an example of community organizers at work.
At the Justice Dept., a new 20-person unit dedicated to fair lending issues received a record number of discrimination referrals from regulators in 2010 and has dozens of open cases, according to a recent agency report. Potential penalties can reach into the millions of dollars. “We are using every tool in our arsenal to combat lending discrimination,” Thomas E. Perez, the assistant attorney general for the Civil Rights Div., told a conference of community development advocates in Washington in April.
Make bad loans or pay fines. That’s the government at work.
Why would a politician want to repeat the very steps that led to the housing collapse and put so many people out on the street? There are only four possible reasons: stupidity, ignorance, seeking power or seeking opportunities for corruption.