“Clinton Library’s Doc Dump Reveals CRA Fueled Subprime Bubble”
I’ve recommended Gretchen Morgenson and Joshua Rosner’s Reckless Endangerment on a number of occasions. Let me take this opportunity to do so again.
It consistently amazes me how the American people re-elect to office the very kinds of people who cause them so much harm, be it to liberty or property. Maybe we’re a nation of masochists. Or maybe we’ve just be successfully dumbed down to the point of irretrievability. IBD:
Newly released memos from the Clinton presidential library reveal evidence the government had a big hand in the housing crisis. The worst actors were in the White House, not on Wall Street.
During the 1990s, former Clinton aides bragged that more aggressive enforcement of the Community Reinvestment Act pressured banks to issue riskier mortgages, lending more proof the anti-redlining law fueled the crisis.
A 2012 National Bureau of Economic Research study found “that adherence to that act led to riskier lending by banks,” with “a clear pattern of increased defaults for loans made by these banks in quarters around the (CRA) exam, (and) the effects are larger for loans made within CRA tracts,” or low-income and minority areas.
To satisfy CRA examiners, Clinton mandated “flexible” lending by large banks. As a result, CRA-approved loans defaulted about 15% more often, the NBER found.
Exhibit A in the 7,000-page Clinton Library document dump is a 1999 memo to him from his treasury secretary, Robert Rubin.
“Public disclosure of CRA ratings, together with the changes made by the regulators under your leadership, have significantly contributed to … financial institutions … meeting the needs of low- and moderate-income communities and minorities,” Rubin gushed. “Since 1993, the number of home mortgage loans to African Americans increased by 58%, to Hispanics by 62% and to low- and moderate-income borrowers by 38%, well above the overall market increase.
“Since 1992, nonprofit community organizations estimate that the private sector has pledged over $1 trillion in loans and investment under CRA.”
Other documents reveal how the community-activist group ACORN and other organizations met with Rubin and other top Clinton aides on “improving credit availability for minorities.”
Clinton’s changes to the CRA let ACORN use the act’s ratings to “target merging firms with less-than-stellar records and to get the banks to agree to greater community investment as a condition of regulatory approval for the merger,” White House aide Ellen Seidman wrote in 1997 to Clinton chief economist Gene Sperling.
“Community groups have come to recognize how terribly powerful CRA has been as a tool for making credit available in previously underserved communities,” Seidman added.
Seidman later boasted that Clinton’s 1995 CRA revisions created not only the subprime mortgage market but also the subprime securities market. Of course, subprime loans and their high default rates ruined minority neighborhoods when the market crashed.
Memos also reveal how Clinton aides held repeal of the Glass-Steagall Act hostage to strengthening the CRA. They gave Republicans deregulation of banking activities in exchange for over-regulating how those banking activities applied to low-income communities.
In 2000, HUD Secretary Andrew Cuomo lit the fuse on the subprime bomb by requiring Fannie Mae and Freddie Mac to purchase subprime, CRA and other risky mortgages totaling half their portfolios.
A 1993 memo, “Racism in Home Lending,” captured the tone of Clinton’s affordable-housing crusade. It proposed coordinating with the Washington Post and Congressional Black Caucus on bank investigations.
These White House papers are smoking-gun evidence of Clinton’s culpability in creating the subprime bubble. The mainstream media’s silence is deafening.
It’s not so much deafening as it is entirely predictable and of a piece with the increasingly unassailable fact that objectivity as a journalistic paradigm has given way to activism, which in the case of liberal Democrats amounts to circling the wagons, engaging in damage control when necessary, and an endless series of inconsistencies and deflections.
Worse still is that the same charade that goes on DC — where we pretend an adversarial 2-party system is still extant — has been copied by the mainstream press, which hires establishment GOPers (who voted for Kerry) or entrenched inside-the-Beltway dinosaurs, to give the “conservative” countervoice to the prevailing liberal bias, a check that isn’t a check, just as David Brooks, Jennifer Rubin, and (today) Robert Costa aren’t conservatives in any meaningful sense of the word.
But honestly, how can you blame them for copying a paradigm that has worked so successfully to push progressivism — of the rapid kind or the slow, lumbering kind preferred by neo-statist Republicans — so successfully over the last hundred or so years?
If we continue to act dumb, I expect they’ll continue to treat us that way.