Quote Originally Posted by Lyle View Post
First off, to answer you Kirkland Jimmy Carter started the ball rolling with his "good though but a dumb idea" approach of getting the government to force banks to make loans to "poor people" for them to get houses. we've got a full blown catastrophe made even worse by Obama creating TARP which has done next to nothing for actual "Troubled Asset Relief"
Jimmy Carter was responsible for the Community Reinvestment Act (CRA), which Clinton did indeed expand. It worked perfectly well for over 30 years with no problems. When the housing bust happened, CRA loans accounted for a whopping six percent of the total dollar amount of subprime loans. The other 94% were made by a mortgage-lending system which was completely deregulated in 2003 by the war criminal Bush. All the subprime loans that went bad were made after 2003, and they were made because Bush's regulators literally took a chainsaw to US mortgage regulations. I explained it to you already here, but facts and evidence have no place inside our head and you quickly ejected them and you've gone back to believing the crap peddled by right wing nutjobs that blamed black people and Jimmy Carter for the financial meltdown. It's also worth pointing out that although subprime loans went bad first, they're less than 20% of the dollar total of bad mortgages, personal loans etc. made in the 2002- 8 period. Over half the bad mortgages were om half million plus homes, none of which were covered by the CRA. Like I said, only six percent of actual subprime loans, or around one percent of the total bad debt rang up before the meltdown.

Here's a Fed chairman explaining the six percent number :

Recently, Federal Reserve staff has undertaken more specific analysis focusing on the potential relationship between the CRA and the current subprime crisis. This analysis was performed for the purpose of assessing claims that the CRA was a principal cause of the current mortgage market difficulties. For this analysis, the staff examined lending activity covering the period that corresponds to the height of the subprime boom.4.........


Putting together these facts provides a striking result: Only 6 percent of all the higher-priced loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas, the local geographies that are the primary focus for CRA evaluation purposes. This result undermines the assertion by critics of the potential for a substantial role for the CRA in the subprime crisis. In other words, the very small share of all higher-priced loan originations that can reasonably be attributed to the CRA makes it hard to imagine how this law could have contributed in any meaningful way to the current subprime crisis.

FRB: Speech--Kroszner, The Community Reinvestment Act and the Recent Mortgage Crisis--December 3, 2008


Now here's a bunch of stuff I'm copying and pasting from a previous thread that explains how the meltdown happened. This is for other peoples' benefit as even if you do read it in a month or two you'll be back to blaming Jimmy Carter again. I can then just link this post. Anyway, from before :

I'll give you a quick rundown of why this actually happened.

Firstly the GOP removed all regulations preventing mortage originators (commercial banks, mortgage lending firms etc.) selling those loans to a third party once they'd made them. These laws were introduced in the Depression because similar crooked stuff in the 1920s helped create the Depression.

These third parties broke up the rights to the payments from the mortgages into lots of little pieces, combined these pieces with the rights to payments for little pieces of lots of other mortgages, repacked these in “creative” ways, and re-sold them to fourth, fifth and sixth parties. Four, five and six then used these promises as their own equity in order to raise further debt of their own. This would be like you using an IOU from your neighbour as your down payment for a mortgage. So when lots of these over-leveraged homeowners started to miss mortgage payments, parties four, five and six had less money than they expected, and they had problems making their own debt payments if they themselves had taken out enough debt. Oh yeah, many of these debt contracts are in fact between parties four, five and six.

When Greenspan cut the lending rate to effectively zero in 2004 in an attempt to jumpstart the economy after the failure of the Bush tax cuts to create growth, it became possible for the mortgage industry to make vast numbers of new loans. The third, fourth and fifth parties were all desperate to buy more. So the mortgage industry went crazy from 2004 onwards, creating vast numbers of new products (no document loans, no proof of income loans, interest-only loans etc.) They weren't worried if these people could pay the loans off because they didn't have to hold onto them any more due to deregulation -- they could sell them all off to securities firms.

But there was still a ton of regulatory bodies that prevented predatory lending, again created in the Depression era. These Federal agencies had to power to investigate, prosecute and close down predatory lenders. The Bush administration's solution to this? Staff them with banking lobbyists and use the agencies to prevent investigation and prosecution of bad lenders -- that's right, using the agencies to doi exactly the opposite of what they were intended to do.

Here's the former Governor of New York explaining what happened when he and a bunch of other States tried to stop bad lending :

The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules. But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation.



Eliot Spitzer - Predatory Lenders' Partner in Crime - washingtonpost.com




Here are a few good quotes I was going to make into a blog post on this :




"Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending."

Alan Greenspan
Chairman of the Federal Reserve Bank,
April 2005




"Mr. Howard made it clear to the mortgage broker that he could not read or write, but his loan application erroneously claimed he had had 16 years of education."

Center for Responsible Lending report
"IndyMac: What Went Wrong?"
June 30, 2008




"I would reject a loan and the insanity would begin,"
one former underwriter
told CRL. "It would go to upper management and the next
thing you know it's


going to closing... I'm like, 'What the Sam Hill?
There's nothing in there to
support this loan.'"

Center for Responsible Lending report
"IndyMac:
What Went Wrong?"
June 30, 2008


What is that movie? Boiler Room? That's what it's like. I mean,
it's the [coolest] thing ever. Cubicle, cubicle, cubicle for 150,000
square feet. The ceilings were probably 25 or 30 feet high. The
elevator had a big graffiti painting. Big open space. And it was
awesome. We lived mortgage. That's all we did. This deal, that deal.
How we gonna get it funded? What's the problem with this one? That's





all everyone's talking about . . . 
We looked at loans. These people didn't have a pot to piss in. They can barely make car payments and we're giving them a 300, 400 thousand dollar house.






Then the next one came along, and it was no income, verified assets. So you don't have to tell the people what you do for a living. You don't have to tell the people what you do for work. All you have to do is state you have a certain amount of money in your bank account. And then, the next one, is just no income, no asset. You don't have to state anything. Just have to have a credit score and a pulse.
[reporter] Alex Blumberg: Actually, that pulse thing. Also optional. Like the case in Ohio where twenty-three dead people were approved for mortgages.
------------------------------------------------------------------------------------------------------------------------------


But even after these loans are made there's no crisis that will bring down the entire financial system. How did that happen? You can't just take a bunch of bad loans, slice and dice them to "spread the risk", package them into securities and sell them to investors, because the securities have to undergo a rating process by the credit-rating agencies. The best credit rating you can get is AAA, which US government bonds, the safest investment on the planet, have. There's no way that junk loans could ever get a AAA rating, right? Not after they have to go through a ratings process which would investigate the original loans, interview and check the documentation of the mortgage-holders etc., right? Wrong. The GOP scrapped all oversight of the credit-ratings industry in 2002. They were left to self-regulate. And lo and behold, by an alchemical process involving the payment of hefty fees from the securities firms where this junk paper originated subprime loan securities got a AAA rating, allowing them to be sold and traded as high-quality investments comparable to US bonds.