|09-10-2012, 03:45 AM|
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Housing arsonist portrayed by DNC propagandists as rescueing fireman
History has rarely seen anything as surreal as former President Clinton riding into Charlotte as a hero rescuing America and President Obama from failed Republican economic policies.
Clinton was the architect of the financial crisis, yet he was able to use the Democratic National Convention to polish his phony credentials as economic genius.
He brazenly warned that GOP challengers Mitt Romney and Paul Ryan would wreck the economy by going back to "the same old policies that got us in trouble in the first place."
"They want to cut taxes for high-income Americans even more than President Bush did. They want to get rid of those pesky financial regulations designed to prevent another crash and prohibit federal bailouts."
This may be Clinton's biggest whopper yet. Truth is, it was his own reckless housing policies that wrecked the economy.
Compared to his plan to nationalize the health care system, his housing policy seemed a small and rather innocuous plank in his domestic agenda, and few paid it much mind. But under his National Homeownership Strategy, Clinton took more than 100 executive actions to pry bank lending windows wide open.
First, using his executive order powers, he marshaled 10 federal agencies under the little-known Interagency Task Force on Fair Lending to enforce new "flexible" mortgage underwriting guidelines to combat "lending discrimination in any form."
For the first time, banks were ordered to qualify low-income minorities with spotty credit.
The 1994 policy planted the seeds of the mortgage crisis, as lenders abandoned prudent underwriting standards altogether.
The next year, Clinton set numerical targets for lending in predominantly minority census tracts under a revised Community Reinvestment Act, and added several hundred bank examiners to enforce the tougher CRA rules. Banks that failed had their expansion plans put on hold, a slow death sentence in an era of bank mergers and acquisitions.
For the first time, CRA ratings were made public, egging on Acorn and other radical inner-city groups, who used the reports to extort banks for more than $6 trillion in subprime and other loan set-asides by 2008.
When bankers resisted being saddled with so many additional risky loans, Clinton tapped Fannie Mae and Freddie Mac to take them off their books, while freeing bankers to originate more of the political loans. He directed HUD to hike Fannie's and Freddie's goals for underwriting affordable loans, which remained in force throughout the 2000s.
When the mortgage giants pushed back, complaining it would be hard to meet the higher targets, Clinton pushed them to load up on subprime loans.
He also authorized Fannie and Freddie for the first time to buy subprime securities to earn credits against the HUD goals. The mortgage giants jumped at the chance, since it allowed them to meet the onerous new goals.
A 2005 HUD report attributed the explosion in subprime securities between 2001 and 2004 to HUD's tougher goals, along with tougher CRA enforcement. Between 2004 and 2006, the mortgage giants bought $613 billion, or 20%, of the private-market securities created to meet their demand under HUD rules.
For good measure, Clinton late in his second term installed several of his cronies, including Franklin Raines, on the inside of Fannie and Freddie. They in turn bought loans from Countrywide and other subprime lenders, who signed "fair lending" contracts with HUD obligating them to meet lending quotas.
Thus the government created a feeding frenzy for subprime loans by putting Fannie and Freddie and private lenders in competition through quota systems enforced by HUD and Treasury.
At the same time, Clinton enlisted prosecutors to sue banks and lenders for allegedly discriminating against minority borrowers, driving banks and subprime lenders deeper into risky areas.
Clinton's policies for the first time threw millions of previously unqualified buyers into the mortgage mix, many of whom later refinanced into even riskier adjustable-term subprime loans which defaulted in droves before the crisis.
Clinton's easy-credit orgy fed a historic bubble that began in 1997 and finally burst in 2007.
Like an arsonist-turned-firefighter, Clinton now deigns to want to save a housing industry he torched during his presidency, while fingering others for the financial crime.
© 2012 Investor's Business Daily, Inc.