Today Investors.com posted a story stating that:
President Obama says the Occupy Wall Street protests show a “broad-based frustration” among Americans with the financial sector, which continues to kick against regulatory reforms three years after the financial crisis.
“You’re seeing some of the same folks who acted irresponsibly trying to fight efforts to crack down on the abusive practices that got us into this in the first place,” he complained earlier this month.
The article asks, “But what if government encouraged, even invented, those “abusive practices”?
Well, they did. In December of 2008, I (rightwinggranny.com) posted an article linking to a youtube video entitled “Burning Down The House.” The story told in that video may be finally getting out. I strongly suggest you follow the link and watch the video.
Investors.com is reporting on a document from 1994 that sought to make sure that there was no discrimination in the lending industry. A great idea, but it overlooked the fact that banks needed to discriminate against those people seeking loans that they were unable to pay back.
The article reports:
At President Clinton’s direction, no fewer than 10 federal agencies issued a chilling ultimatum to banks and mortgage lenders to ease credit for lower-income minorities or face investigations for lending discrimination and suffer the related adverse publicity. They also were threatened with denial of access to the all-important secondary mortgage market and stiff fines, along with other penalties.
The threat was codified in a 20-page “Policy Statement on Discrimination in Lending” and entered into the Federal Register on April 15, 1994, by the Interagency Task Force on Fair Lending. Clinton set up the little-known body to coordinate an unprecedented crackdown on alleged bank redlining.
The edict — completely overlooked by the Financial Crisis Inquiry Commission and the mainstream media — was signed by then-HUD Secretary Henry Cisneros, Attorney General Janet Reno, Comptroller of the Currency Eugene Ludwig and Federal Reserve Chairman Alan Greenspan, along with the heads of six other financial regulatory agencies.
“The agencies will not tolerate lending discrimination in any form,” the document warned financial institutions.
This is the root of the housing crisis. Someone much wiser than I once said, “The road to hell is paved with good intentions.” This is an example of that statement.
We haven’t learned our lesson yet. The article reports:
Tom Perez, assistant attorney general for civil rights, recently testified that his division “continues to participate in the federal Interagency Fair Lending Task Force.” And he and the task force are working with the newly created Consumer Financial Protection Bureau to “enhance fair-lending enforcement.”
The fair-lending task force’s original policy paper undercuts the notion the financial crisis was all about banker “greed,” though it certainly played a role after the fact. Rather, it offers compelling evidence that the crisis evolved chiefly from government mandates and threats to increase lending to applicants who could not afford them.
This is the story about our current financial woes that needs to be told.