Here's how the seed of this debacle was planted.
"...(This) crisis can trace its roots to Bill Clinton’s signature on legislation making it easier for minority constituents with bad credit to obtain mortgages. In 1995, he had his Treasury Secretary, Robert Rubin, rewrite the lending rules for the Community Reinvestment Act, opening the flood gates of mortgage lending to unqualified borrowers.
This legislation, in effect, applied affirmative action to the lending industry, which is to say that the current crisis is NOT a “free market failure” but the result of socially engineered financial policy by the central government. The financial markets welcomed their new customers with open arms, fueling a real estate boom across the board.
These so-called “subprime mortgages,” which were offered at variable interest rates, were widely perceived as good investments. Investors used the high-risk instruments to secure assets in other markets fueling profits for investment banks and mortgage lenders. The subprime market thus expanded rapidly and the mortgage instruments were used by other firms as collateral for investments in stocks, commodities and the like.
Unfortunately, no one questioned the pell-mell regulatory system of oversight for these transactions until large cracks appeared in our economy’s foundation, the first being the collapse of Countrywide, the nation’s largest subprime lender. Then banks and mortgage lenders large and small began downsizing, dumping assets and closing their doors. Bear Stearns filed for bankruptcy. Fannie Mae and Freddie Mac, holders of trillions of dollars in mortgages, were bailed out with 200 billion taxpayer dollars. Lehman Brothers filed for bankruptcy, and insurance giant AIG was given an $85-billion taxpayer prop to keep it solvent.
From an article at The Patriot Post by Mark Alexander
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ReplyDeleteSo Bush couldn't have stopped this? Bush took the Sub Prime Mortgages even further.
ReplyDeleteThere were people who couldn't even afford a 5 dollar burger buying houses!
A year ago it was said that the banks are in great shape. All of a sudden they collapse? It is impossible for such major corporations to collapse in one day. This was a long process. It took years for this to happen and yet the Bush administration (like always)fed us BS/
PS: I agree. It did start with Bill Clinton no one is denying that. But the Republicans could have ended. However, they were in favor of it so THEY are the ones to blame. The ones who are in office. The ones who brought us from a surplus (Clinton years) to a deficit.
ReplyDeleteIf I may respond to your acusations (with no statements of facts to back them up).
ReplyDeleteYou said, "So Bush couldn't have stopped this?"
In 2003 the administration tried to reign in Fannie and Freddie and the sub-prime market. The Dem's promply rejected the notion -
“These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,’’ said Rep. Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.” Rep. Mel Watt, D-N.C., agreed. (The New York Times, Sept. 11, 2003)
You said, "Bush took the Sub Prime Mortgages even further."
What exactly does that mean and specifically where did you get your information?
You said, "A year ago it was said that the banks are in great shape."
Can you quote from whom you heard these statements? Then you said, "All of a sudden they collapse?"
Where have you seen that all of a sudden there is a collapse? News organizations and pundits have been saying this has been years in the making.
You said, "It is impossible for such major corporations to collapse in one day."
You are correct. It would be impossible and they did not.
You said, "This was a long process. It took years for this to happen and yet the Bush administration (like always)fed us BS/
You are correct in that it took years for this to culminate. Can you cite instances of the Bush administration feeding us BS? Can you provide a quote from the administration that has been deemed to be false? Please provide a link to it.
You said, "But the Republicans could have ended (it)."
What exactly does that mean? Are you saying they had the opportunity and the answer but chose not to implement it? If that is the case please provide the specific information regarding what they chose not do to end it.
You said, "However, they were in favor of it so THEY are the ones to blame. The one's who are in office."
Even though we have already established that a former President essentially planted the seed for this disaster, it's "The one's who are in office" to blame? Both sides are to be blamed. Where is the information providing support to your assertion that they (Republican's and not the Dem's as well) were in favor of it? "It" being sub-prime mortgage lending, I presume. Please provide and links or references.
You said, "The ones who brought us from a surplus (Clinton years) to a deficit."
The US can run a surplus and still add to the debt which it did during the Clinton years. The surplus reduced the publicly held debt but the debt itself went up because the debt included money owed to government "trust funds" like Social Security. So while you say there was a surplus, it's really just a numbers game. The government has been in deficit spending since the late 1970's.