Wall Street Occupiers Uninformed and Stupid

If you tell a big enough lie and you tell it often enough people will believe it. This was the guiding principal behind Nazi propaganda. Today the American media and the Democrats have used that technique to blame greedy Wall Street financiers and insufficient regulations for our present financial crisis.
Knowledgeable people know that under President Carter Congress pass the Community Reinvestment Act to provide affordable housing to the lower class. Beginning in 1992, the Clinton Administration required the federal government’s Fannie Mae and Freddie Mac institutions to direct a substantial portion of their mortgage financing (30%) to borrowers who were at or below the median income in their communities. Later the percentage would increase to 55%.
Beginning in 1995, new rules required banks and other lending organizations to grant housing loans to unqualified borrowers. Violating long standing real estate guidelines, the Clinton Administration threatened to penalize any financial institution that did not give loans to those with blemished credit, little or no money for down payments or insufficient finances to pay for the homes. The latter led to subprime mortgages where the home buyer was given a low introductory rate which increased later. Subprime borrowers expected future pay raises to cover any mortgage interest increase in the future. It rarely worked that way. These bad or toxic loans made the lending institutions liable for any loan defaults.
So the government compounded the situation by having Fannie Mae and Freddie Mac buy the deficient mortgages from the banks. In effect, the federal government (and indirectly tax payers) purchased 70% of these loans from the lending institutions. With this government backing of loans, demand for homes increased. This created the biggest housing bubble in American history.
As the housing bubble grew, rising prices suppress delinquencies and defaults. People who could not meet their mortgage obligations could refinance or sell, because their houses were now worth more; however, refinancing or selling reached what is called the law of diminishing returns. By 2007 an unprecedented number of weak mortgages went into default, driving down housing prices throughout the U.S. and throwing Fannie and Freddie into insolvency.
Research by Edward Pinto, a former chief credit officer of Fannie Mae, showed that 27 million loans—half of all mortgages in the U.S.—were subprime or weak loans by 2008. Clearly federal government regulations enacted under the Clinton administration created the housing bubble that caused the 2008 recession. But the Democrats, with the help of the media, deflected the blame by claiming it was Wall Street greed. Using the Nazi propaganda technique, they created the myth that Wall Street was responsible for our present economic crisis. The gullible and historically illiterate believed it.

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About camden41

Retired public school administrator Retired history professor: Taught Western Civilization, American Civil War, United States History, Economic History, Ancient & Medieval Foundations, American History Since 1945
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