Lie Pie Title:  Financial Crisis Blamed on the CRA
Lie Pie Classification:  election lie pie, lie sausage

Editor's Note:  No doubt there is plenty of blame to spread around for our current financial crisis. However, I have to take issue with folks who are just a little too eager to point the finger at poor people, minorities or otherwise, and the Community Reinvestment Act (CRA).  People who claim to be Christians have a duty to defend the poor (Proverbs 14:31, Mathew 25:31-45), so this stampede to lay blame on "the least of these" is very unbecoming as well as unjustified.  There are plenty of villains in this crisis, but the CRA ain't one of them.

For starters, please read this McClatchy article.  The article references the President's Working Group on Financial Markets (PWG):

"The Presidents Working Group’s March policy statement acknowledged that turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007. The first area of PWG recommendations concerned reforms to key areas of the mortgage origination process."

The McClatchy article also references remarks by Janet L. Yellen, President and CEO, Federal Reserve Bank of San Francisco back in March:

"There has been a tendency to conflate the current problems in the subprime market with CRA-motivated lending, or with lending to low-income families in general. I believe it is very important to make a distinction between the two. Most of the loans made by depository institutions examined under the CRA have not been higher-priced [i.e. subprime] loans, and studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households."

So, the CRA has been in effect with a record of success since 1977, the President's Working Group on Financial Markets says that the crisis was triggered by subprime loans originated late 2004 through 2007, and the vast majority of subprime lenders weren't even subject to CRA rules because they aren't depository institutions.  It just doesn't add up that the CRA is the boogeyman in this global financial meltdown.

Why all the haste to blame the financial crisis on poor minorities and the CRA? Perhaps we should ask all the millionaires with their fancy degrees and fluency in legalspeak who drew up these flawed mortgage contracts, put their stamp of approval on them, and then sold them down the river to become someone else's problem.  If you are interested, you can find these folks at cocktail parties in DC, rubbing shoulders with politicians, political operatives, and lying TV and radio talkers.   --Granny

Dear Friends,
I am sounding an alarm! For the life of me, I cannot figure out why this is not being discussed on the media or why conservatives are not making their case: IT IS SO IMPORTANT!!!!! The following is a condensation of a series from the Investor's Business Daily explaining "What Caused the Loan Crisis":

1977: Pres. Jimmy Carter signs the Community Reinvestment Act into Law. The law pressured financial institutions to extend home loans to those who would otherwise not qualify. The Premise: Home ownership would improve poor and crime-ridden communities and neighborhoods in terms of crime, investment, jobs, etc.

Results: Statistics bear out that it did not help.

How did the government get so deeply involved in the housing market?

Answer: Bill Clinton wanted it that way.

1992: Republican representative Jim Leach (IO) warned of the danger that Fannie and Freddie were changing from being agencies of the public at large to money machines for the principals and the stockholding few.

1993: Clinton extensively rewrote Fannie Mae and Freddie Mac's rules turning the quasi-private mortgage-funding firms into semi-nationalized monopolies
dispensing cash and loans to large Democratic voting blocks and handing favors, jobs and contributions to political allies. This potent mix led inevitably to corruption and now the collapse of Freddie and Fannie.

1994: Despite warnings, Clinton unveiled his National Home-Ownership Strategy which broadened the CRA in ways congress never intended.

1995: Congress, about to change from a Democrat majority to Republican, Clinton orders Robert Rubin's Treasury Dept. to rewrite the rules. Robert Rubin's Treasury reworked the rules, forcing banks to satisfy quotas for sub-prime and minority loans to get a satisfactory CRA rating. The rating was key to expansion or mergers for banks. Loans began to be made on the basis of race and little else.

1997 - 1999: Clinton, bypassing Republicans, enlisted Andrew Cuomo, then Secretary of Housing and Urban Development, allowing Freddie and Fannie to get into the sub-prime market in a BIG way. Led by Rep. Barney Frank and Sen. Chris Dodd, congress doubled down on the risk by easing capital limits and allowing them to hold just 2.5% of capital to back their investments vs. 10% for banks. Since they could borrow at lower rates than banks their enterprises boomed.

With incentives in place, banks poured billions in loans into poor communities, often "no documents", "no income", requiring no money down and no verification of income. Worse still was the cronyism: Fannie and Freddie became home to out-of work-politicians, mostly Clinton Democrats. 384 politicians got big campaign donations from Fannie and Freddie. Over $200 million had been spent on lobbying and political activities. During the 1990's Fannie and Freddie enjoyed a subsidy of as much as $182 Billion, most of it going to principals and shareholders, not poor borrowers as claimed.

Di d it work? Minorities made up 49% of the 12.5 million new homeowners but many of those loans have gone bad and the minority homeownership rates are shrinking fast.

1999: New Treasury Secretary, Lawrence Summers, became alarmed at Fannie and Freddie's excesses. Congress held hearings the ensuing year but nothing was done because Fannie and Freddie had donated millions to key congressmen and radical groups, ensuring no meaningful changes would take place. "We manage our political risk with the same intensity that we manage our credit and interest rate risks," Fannie CEO Franklin Raines, a former Clinton official and current Barack Obama advisor, bragged to investors in 1999.

2000: Secretary Summers sent Undersecretary Gary Gensler to Congress seeking an end to the "special status". Democrats raised a ruck us as did Fannie and Freddie, headed by politically connected CEO's who knew how to reward and punish. "We think that the statements evidence a contempt for the nation's housing and mortgage markets" Freddie spokesperson Sharon McHale said. It was the last chance during the Clinton era for reform.

2001: Republicans try repeatedly to bring fiscal sanity to Fannie and Freddie but Democrats blocked any attempt at reform; especially Rep. Barney Frank and Senator Chris Dodd who now run key banking committees and were huge beneficiaries of campaign contributions from the mortgage giants.

2003: Bush proposes what the NY Times called "the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago". Even after discovering a scheme by Fannie and Freddie to overstate earnings by $10.6 billion to boost their bonuses, the Democrats killed reform.

2005: Then Fed chairman Alan Greenspan warns Congress: "We are placing the total financial system at substantial risk". Sen. McCain, with two others, sponsored a Fannie/Freddie reform bill and said, "If congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole". Sen. Harry Reid accused the GOP ;of trying to "cripple the ability of Fannie and Freddie to carry out their mission of expanding homeownership" The bill went nowhere.

2007: By now Fannie and Freddie own or guarantee over HALF of the $12 trillion US mortgage market. The mortgage giants, whose executive suites were top-heavy with former Democratic officials, had been working with Wall St. to repackage the bad loans and sell them to investors. As the housing market fell in '07, sub-prime mortgage portfolios suffered major losses. The crisis was on, though it was 15 years in the making.

2008: McCain has repeatedly called for reforming the behemoths, Bush urged reform 17 times. Still the media have repeated Democrats' talking points about this being a "Republican" disaster. A few Republicans are complicit but Fannie and Freddie were created by Democrats, regulated by Democrats, largely run by Democrats and protected by Democrats. That's why taxpayers are now being asked for $700 billion!!

If you doubt any of this, just click the links below and listen to your lawmakers own words. They are condemning!

http://www.youtube.com/watch?v=H9juJr8CSY4&feature=related

Postscript: ACORN is one of the principle beneficiaries of Fannie/ Freddie's slush funds. They are currently under indictment or investigation in many states. Barack Obama served as their legal counsel, defending their activities for several years.

Please share this with everyone you know. Send it. Print it. Talk about it. America needs to know!!!