If you listened to Senator Biden in the debate, you heard him quote the Obama mantra that the current mortgage meltdown began when Bush came to office. He’s pretty much right, only Bush wasn’t the cause, only the caretaker. What the Clinton Administration intended as a plan to pull minorities and the poor out of perpetual poverty was in fact the seed of our destruction.
Even before the Clinton Administration loosened mortgage rules in September of 1999, Fannie Mae was already loosening the rules to get more people into their own house. HUD Secretary Andrew Cuomo was pushing Fannie and Freddie to “open up” the mortgage market. As a resultm home ownership had shot up in the 90s, especially among minorities. “The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998,” according to Harvard University’s Joint Center for Housing Studies. the increase for African Americans was 71.9% and 46.3% for Asian Americans.
Based on these successes, Clinton encouraged Fannie May to minimize down payment criteria and loosen qualifying rules, to encourage banks to make loans to people with less-than-stellar credit ratings. “The Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae’s and Freddie Mac’s portfolio be made up of loans to low and moderate-income borrowers.”
However, a Sep 1999 New York Times article warned that “the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue” and quoted Peter Wallison of the American Enterprise Institute as saying ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the (savings and loan) industry.”
It was low risk for Clinton. He was leaving office. His successor surely wouldn’t be able to handle the problem, and soon his wife would be able to step in and clean it up – and he could be in the white house again! Only Bush did better than expected, and kept the economy moving – until now.
Suddenly oil speculation spiked the economy and pushed those marginal homeowners into foreclosure. It’s taking a government rescue to “step up and bail out” the credit markets.
source: NY Times Business, Sept 30, 1999
Quote of the Week
“I believe that banking institutions are more dangerous to our liberties
than standing armies. If the American people ever allow private banks to
control the issue of their currency, first by inflation, then by
deflation, the banks and corporations that will grow up around the banks
will deprive the people of all property until their children wake-up
homeless on the continent their fathers conquered.”
Thomas Jefferson Letter to the Secretary of the Treasury Albert Gallatin
(1802) 3rd president of US (1743 – 1826)
Congress saw it coming: http://www.naplesnews.com/news/2008/oct/04/brent-batten-tracking-blame-financial-meltdown/
Clinton’s Fault (6 Oct) http://www.rgj.com/apps/pbcs.dll/article?AID=/20081006/OPED02/810060319
Cuomo’s role: http://www.villagevoice.com/content/printVersion/541234