Mortgage crisis likely began with Clinton Administration effort to provide housing to minorities
October 8, 2008 —
Who’s to blame for the current economic crisis, and does it really matter?
Yes, it matters. The crash on Wall Street is likely to reach Main Street. More to the point, it’s likely to reach Bridge Street. It’s in everyone’s interests to educate ourselves to the utmost, because in order to fix something, it helps to know the cause.
This maxim holds true on the environment (as Joe Biden pointed out to Sarah Palin, we need to know the cause of global warming in order to fix it) as well as the economy.
The U.S. Treasury is planning how to use the tools recently awarded in the $700 billion “Bailout Bill.” To use it wisely, the Treasury (and the American people) should be aware of what went wrong.
So who’s to blame? Or better yet, which economic philosophies are to blame?
The causes are myriad and complex, to be sure, but it’s worth noting that a major cause of the problem may find its roots in policies which began to spread in 1999.
A New York Times article printed on September 30 of that year outlines the new method of delivering sub-prime mortgages, calling it a hopeful new program to deliver homes to minorities and low-income Americans. The article states that Fannie Mae officials were, “hoping to make (it) a nationwide program by next spring.”
The article also indicates that banks, thrift institutions and mortgage companies had been pressing Fannie Mae to help them, “make more loans to so-called sub-prime borrowers.”
The Clinton Administration was also putting pressure on Fannie Mae to deliver these mortgages to people who, it seems, would end up having a disastrously high rate of default.
Does this mean the whole thing was Clinton’s fault?
But it’s worth noting that there’s plenty of blame to go around to both parties. The Republicans had plenty of time to see this crisis coming and do something about it. Both Sen. John McCain and Sen. Barack Obama have claimed to have seen this collapse coming, and tried and failed to do something about it.
The true problem here, in my assessment, is political correctness. Nobody wanted to step up and say that low-income people shouldn’t be buying houses. It’s a politically untenable position.
It has long been an intractable part of the American Dream to own a home. Imagine a politician standing up in 2004 or 2005 and successfully passing a bill through Congress which denied this crucial element of the American dream to those who wanted it – even if they couldn’t afford it.
It doesn’t seem possible.
On the other hand, Clinton’s advisors were wrong to push Fannie Mae – as were the mortgage brokers, bankers, and others who must have known the risks involved in sub-prime lending. The Bush Administration wholeheartedly continued with the folly, as did Wall Street, as did the U.S. Congress.
In this case, my conclusion is that America became the victim of its own over-reaching dreams. We want so much to be a land of promise. We yearn for it. But the American Dream must be earned – it cannot be awarded like a gift to those who have not earned it for themselves.
It is this element of the American Dream – the part where we remember that the Dream must be earned – that must inform the next generation of voters, politicians, bankers, and homeowners.
Read the NY Times article here.
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