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Government and Leftist Groups Created the Housing Bubble

November 17, 2009

The housing bubble that is now deflating and wreaking havoc with the economy was created by several factors, Glenn Beck said on his TV show today.

“The Fed and the politicians” are responsible, he said.

Activist groups were encouraged to agitate by the Carter-era Community Reinvestment Act, which enshrined in law a kind of lending protection racket. Banking regulators were given the power to make trouble for banks that failed to lend enough money to so-called underserved communities. Banks that paid enough — whatever that means — got left alone, but banks that didn’t, got their legs broken.

How much money is enough to satisfy the law? Even the Federal Reserve Board can’t say for sure. From the Fed’s online summary of the Act:

The CRA requires that each depository institution’s record in helping meet the credit needs of its entire community be evaluated periodically. That record is taken into account in considering an institution’s application for deposit facilities.Neither the CRA nor its implementing regulation gives specific criteria for rating the performance of depository institutions. Rather, the law indicates that the evaluation process should accommodate an institution’s individual circumstances.

One can almost imagine a CRA commissar saying, “It’d be a real shame if something happened to that nice bank of yours.” When in doubt about potential CRA liability, don’t risk committing a crime against diversity: make the loan. Or else.

After CRA came into effect, Saul Alinsky-inspired “community organizer” groups such as ACORN, the Greenlining Institute, and National Council of La Raza got into the shakedown business. They preach the hateful class-warfare rhetoric of their fellow community organizers Jeremiah Wright, Jesse Jackson, Al Sharpton, and Michael Pfleger.

Even though the left’s pathological preoccupation with economic egalitarianism never takes a vacation, the left isn’t entirely to blame for Wall Street’s current troubles.

The Federal Reserve Board encouraged bad behavior by keeping interest rates artificially low for far too long after the 9/11 attacks. Since money was cheap, bankers went overboard with exotic mortgage products, and investors kept inflating the housing bubble, sending home prices into the stratosphere.

But no one can deny the fateful role that liberal financial activist groups played in making a bad situation much worse.

  1. David Forsmark permalink
    November 18, 2009 12:17 am

    I wish Glenn would have Peter Schweizer on the show:

    • F. Swemson permalink
      November 18, 2009 1:01 pm

      The CRA, created during the Carter years, is of course, the primary reason for the housing bubble that led us into this depression.

      In early 1993 Bill Clinton ordered new regulations for the CRA which would increase access to mortgage credit for inner city and distressed rural communities. The new rules went into effect on January 31, 1995 and featured the following provisions:

      1: Federal home-loan data to be broken down by neighborhood, income group, and race;

      2: Community groups were granted the opportunity to complain when banks were not loaning enough to specified neighborhood, income group, and race. (The Obama – Acorn connection)

      3: Community groups that marketed loans to targeted groups could collect fees from the banks.

      According to a Treasury Dept. study of lending trends in 305 U.S. cities between 1993 and 1998 467 billion dollars in mortgage credit flowed from CRA-covered lenders to eligible borrowers. The number of CRA mortgage loans increased by 39 percent. Other loans increased by only 17 percent.

      We hear lots of talk about the government forcing banks into making bad loans. Matthew, in this blog said:

      Activist groups were encouraged to agitate by the Carter-era Community Reinvestment Act, which enshrined in law a kind of lending protection racket. Banking regulators were given the power to make trouble for banks that failed to lend enough money to so-called underserved communities. Banks that paid enough — whatever that means — got left alone, but banks that didn’t, got their legs broken.

      I never hear anyone however, talking about HOW the govt was able to force the banks to do this. If you think about it for a moment, it’s puzzling. Why would the banks acquiesce ? And what constitutional authority would the govt have to force them to do so?

      The answer that I’ve heard from several knowledgeable insiders in the banking community is that the govt used extorionist tactics to achieve this, by threatening to withdraw their FDIC certification if they didn’t comply. Without their FDIC membership, nobody would put any money into the bank.

      So when Michelle Bachmann said we now have a gangster govt, perhaps it;s best for us to remember that our government has been a pack of gangsters for longer than we suspect.

  2. David Thomson permalink
    November 18, 2009 1:03 am

    Matthew Vadum, Thomas Sowell, and I seemingly disagree with David Horowitz on this matter. This disaster is a direct result of race card politics. One was often deemed a racist if they dared object to the madness. However, it also behooves me to add that the situation really got out of control when the majority whites eventually jumped on the bandwagon. Countless house flippers, investors, and realtors greatly fattened their bank accounts—and their skin was not black! They did not blow the whistle and alert the American public to the inevitable disaster. Greed apparently was their primary motivation. I strongly recommend reading Sowell’s, The Housing Boom and Bust.

    • David Forsmark permalink
      November 18, 2009 7:31 am

      Yes, but the origin was the CRA. Once you lower the lending standards, they become lowered for EVERYONE. Also, Clinton’s bailouts of financial institutions for things like investing in Mexico and Russia made ANY kind of investment in American mortgages seem safe by comparison. Those 2 things made the huge meltdown inevitable. Before Clinton, the CRA “only” led to about 5 billion in risky schemes, by the end of Clinton it was 4.2 trillion and climbing.

  3. donnamarie permalink
    November 18, 2009 4:50 am

    I know that much was made of the fact that it was the policies of democrats that got the country into this mess. However, I recall vividly George W. in several speeches stating how great this nation once because so many people owned homes-he was taking credit for it.

    On a side note and like Glenn Beck calls them and ADD moment: Of course, I also recall Hillary Clinton once mocking Bush saying that he liked to call it a “home ownership” society but it really was an “on your own society”… Wow, funny but I never really understood why that was a bad thing.

  4. In the Know permalink
    November 18, 2009 5:27 am

    Whether your a foaming at the mouth Kool-aide junkie or a backwoods alien abductee truther, you cannot (logically?) disagree; This is EXACTLY what happens when you let the government overstep its constitutional boundry.

  5. Jonathan permalink
    November 18, 2009 6:14 am

    Excuse me, Matthew,

    Why not mention the most important point of the show. Glenn started the show with the snippet from CNBC Asia Squawk Box, sent to him by a watchdog. It was a interview with Damon Vickers, of Nine Points Capital Partners.

    “If the global currency crisis unfolds… you get a global government… inevitably you get a new global currency and a new world order… we may be moving towards that… the dollar gets destroyed.”

    Glenn found Vickers and started the show with him and it led into a whole discussion of the realities of the FUTURE. Quit wasting time rehashing what common sense Americans already know about the past. WE’RE NOT GOING TO DO ANYTHING ABOUT IT. So, let’s look forward to what lies ahead for the citizens who occupy the land formerly known as the United States of America.

    I know that Vickers used the naughty conspiracy term “New World Order”, but it led to a very interesting flow of events for the rest of the show. What was interesting was the later mentioning of things such as… how the angle is developing now among politicians and pundits that “we Americans” wanted to live beyond our means.

    Intrinsic to the global conversation is how ALL workers on the globe share the wealth. Up until this time, the assumption was the left in America was talking about making the lives of AMERICAN workers better. All things relative to the upper standard in AMERICA. No. No. No. We’re talking about equality between workers in America and… Bangladesh, India, Mexico. You know, an average wage and an average standard of living that averages out to be about .70 cents an hour with a shack and rationed electricity. A village television set.

    Glenn said it well. We will either be remembered as the stupidest, greediest people who ever lived, or we will become heros who saved the nation from doom. That is the future option.

    Gosh, I hope Glenn continues down this path. He got a good start Tuesday. He needs to just go whole hog on the whole issue that Damon Vickers brought up.

  6. John Davidson permalink
    November 18, 2009 7:05 am

    When pointing out the past failures of leftist programs to the Democrats, one is reminded of a turtle who retracts into its shell when approached.

  7. peachey permalink
    November 18, 2009 6:08 pm

    We are still around in 100 years, we will be remembered as the dumbest people on the planet for allowing our politicians to destroy this country. The CRA was a utopian idea birthed to give the highest point of entitlements to those that would never work for it a massive step-up. The politicians in DC to this day will not admit the insanity and continue to praise and support a an idea that should have never been considered much less put into play. The manager at my bank candidly referred to these as the “4-NO loans” (and Swemson you are correct about withdrawing FDIC membership status). NO job, NO credit, NO money, NO problem. How much money do you want? It was a marriage made in heaven for Progressives, the bankers whose eyes for potential profits were bigger than their bottom line, and the community organizations that made a bundle shilling for those that would never qualify for a loan in the real world. Such is the folly of those that seek equity and “a level playing field” for all.

  8. peachey permalink
    November 18, 2009 6:09 pm

    Sorry guys, it should read If we are around…


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