Yesterday, Barack Obama summoned the heads of the country’s biggest banks to the White House for a good tongue lashing about how they were the villains who caused the financial panic and now it’s their job to fix the economy... by making reckless loans again… No seriously, that’s exactly what happened!
Well, at the risk of confusing you with facts, I’d like to remind you of a little history; the history of a certain Community Organizer, the Community Organization he worked with, and the banking regulation called The Community Reinvestment Act (CRA) which forced the banks to look the other way when writing mortgages.
The Community Organizer, the young Barack Obama, as you’ve guessed by now, was not the lead singer at the time but rather another voice in the chorus. But there he was with Project Vote and ACORN (Association of Community Organizations for Reform Now) in Chicago while they were agitating for looser lending standards by banks so that minorities with poor credit could get mortgages and buy houses. It was a two pronged effort: first, get the government to force the banks to make the loans and second, get the government to purchase the dubious loans from the banks. The second part was to happen through Fannie and Freddie, the giant Government Sponsored Entities (GSEs) who wind-up owning most mortgages in the end. This is ACORN's own website on the CRA: http://www.acorn.org/index.php?id=12443
The strategy started off slowly in the 70s under Carter but by the 90s, when Barack Obama was in the thick of it and Bill Clinton was trolling for votes in the inner city, it was a match made in heaven! Together, ACORN with their army of Community Organizers including the young Barack Obama and Bill Clinton, tweaked the CRA just enough to really get the ball rolling and shook-down the banks to not just make the risky loans, but they also made it almost risk free by making it super easy to unload the paper onto the unsuspecting public through the GSEs. This is what lit the fire we all know as the Subprime Mortgage Crisis of 2008/2009. If you have doubts about any of this, try finding any mention of Subprime Mortgages prior to the CRA. Good Luck.
To repeat, this is just the history of what lit the fire. The rest was done by a host of other factors which are beyond the scope of this brief history. But this author would contend that once the fire was lit, the damage was done and all the other factors just determined the precise timing of the blaze.
Now that you have been reminded of this history, does it not strike you as a tad comical that Obama is now lecturing the bankers on their responsibilities for both the Subprime Mortgage Crisis and getting back to the important business of making reckless loans once again? Admit it, you are laughing a little... I can see the tears running down your cheeks…