The Little Act That Could

The Little Act That Could
By: Kevin Bryant

My brother sent me a nice little article about Fannie Mae and the easing of mortgage lending that appeared in the New York Times on September 30, 1999. Besides spelling out how banks and other lending institutions were going to set out lowering the standards for qualifying for housing loans, it also contained a few quotes objecting to this practice and the possible consequences of it. The one defining thing the article was these institutions were receiving increasing pressure from the Clinton Administration to enact these lower qualification requirements.

Bush 43 (roughly translated) has stated that although he did not apply pressure to continue these practices, he did nothing about them other than voice his concerns to congress and the banking industry. Bill Clinton has repeatedly rejected any attempts to tie him in with the rise and fall of the housing market. Instead of owning up to his part, he has blamed both George W. Bush to a small degree and also has he blames “corrupt democrats who fought against regulating and investigating lenders”.

Hardcore liberals are trying even now to blame all of the housing market troubles on Karl Rove, Bush’s former White House Chief of Staff. It either doesn’t sink into their heads that he had long resigned before the downturn started or they just want to blame someone and he is an easy target since no one on the left ever liked him professionally because he was really good at doing the job he was hired to do.

Sometime after receiving the article from my brother, I tried to link the majority of the reasons for the housing downturn to Clinton, but the more I read about the history behind it all, the more I found myself equally spreading out the blame for mess the housing market finds itself.

The Community Reinvestment Act of 1977 had little effect in its first 15 years in existence. In my opinion, it was done with good intentions but as they say, the road to hell is paved with good intentions. The act was the result of several black community activist and organizers who wanted to improve the living conditions within major inner cities, with Chicago (no shock here) leading the way. The act itself was based on a report in 1961 on lending practices that made it harder for lower income blacks to get housing loans and many of those loans came with higher interest rates and shorter terms. This was determined to be racial discrimination but something tells me that that there was more behind this practice than just the obvious. I doubt very seriously that race played any part of this and income was the driving factor.

In 1992, again it’s my opinion, then President Bill Clinton saw this little act and acted upon it as a way to shore up votes and enhance his chances of re-election by having this act reviewed, updated and to get the wheels in motion for enforcement. In 1995, Clinton set forth in actually enforcing this act and in 1999 had pushed it hard enough that it reformed the lending institute into what it was until the housing bubble that it caused started to crumble.

Though so far, it seems that all the blame really lies at Clinton’s feet, but I don’t think so. The law was written by liberals who had written a broad based piece of legislation without much definition, specifics or allowing for oversight. Former President Carter signed this flawed piece of legislation into law most likely with hopes of redeeming himself for all the blunders he made out of the economy and foreign relations, hoping to win back some of the favor that got him elected to office in the first place. This turned to be about as effective as putting a band-aid on the Titanic and hoping it will keep it from sinking

President Reagan gets a small part of the blame simply based on the fact that he believed in smaller government. With that belief along with his ideas that deregulation was the way to get the economy moving again in the midst of a cold war, he never really took note of this act and it sat there neatly tucked away and sleeping in the government archives.

George Herbert Walker Bush gets some credit as well. During the Savings and Loan scandals and Junk Bond scandals that were ever present during his one term in office, this little act was briefly scanned over as reference material for the bailout & restructuring of the S & L industry. Oversight of the S & L was put into place, but this little act that had been around since 1977 went back into the archives because again it was thought to not be harmful.

Along comes Bill Clinton sees and seizes the opportunity to make great strides into gaining votes within the black and lower income communities throughout America and this little act is morphed into an industry standard.

Now we have George W. Bush in office. He is warned by several individuals of a possible housing bubble bust looming in the near future but decides instead of taking actions to prevent it from happening, he tap dances around the subject and gives a couple of speeches to congress and is effectively silenced by Chris Dodd, Barney Franks and later joined by a little unknown junior senator from Illinois named Barack Obama. All three of them receiving tons of money from Fannie Mae and Freddie Mac for keeping them deregulated and free of interference.

After Enron, another little act with “good intentions” was put into law and known to many as the Mark to Market Rule. This little act, in conjunction with the Clinton revised Community Reinvestment Act effectively killed both the housing and lending markets here in America and has financial institutions and stock markets all over the world in chaos.

Now we have President Obama and you think any of this will be repealed or modified in any way so as to allow the free market system to correct itself? Not so long as it is helping the Obama Administration to nationalize the banking industry and promote socialism here in the U.S. it won’t.