The roots of today's sub-prime mortgage meltdown run back to the early 90's in the Clinton administration. They wanted to end discrimination in the mortgage industry ... a worthy goal by the way! HUD Secretary Henry Cisneros teamed up with AG Janet Reno (the enforcer!) and the Fed Reserve's Comptroller of Currency Eugene Ludwig to force the nation's banks to write loans for those who could not afford them (by normal underwriting standards). Rather than attempting to re-adjust those standards, they were simply thrown out the window. Everyone gets a loan! And if the Feds find that a bank denied a loan to a low-income minority they would be aggressively prosecuted for discrimination under the Fair Lending and Equal Credit acts.
Intentional discrimination (helping white applicants fill out loan papers properly, but not giving such help to minorities) and subtle discrimination (setting standards in underwriting that make it more difficult for qualified minorities to be accepted) should and must be eliminated ! Ceasing to run your mortgage business by fair underwriting procedures is asking for trouble.
Well my friend we have trouble, that starts with T which rhymes with B, and that stands for BAD lending policies forced onto the banking industry by the Clinton administration!
Let me ask you, if there was some Republican around town who was clearly responsible for this mess, don't you think they would be in front of some Congressional committee being crucified right now? Barney Frank, chairman of House Financial Services Committee, who opposed (and defeated) the Bush administration's attempt in 2003 to regulate how Fannie Mae and Freddie Mac are run. Rep. Frank said that Freddie and Fannie are not facing any kind of financial crisis! Article
Maybe Barney Frank should be looking in the mirror and holding hearings on how we got here!!
Check out this article from 1993 National Review
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