How A Clinton-Era Rule Rewrite Made Subprime Crisis Inevitable

By TERRY JONES
INVESTOR'S BUSINESS DAILY | Posted Wednesday, September 24, 2008 4:30 PM PT

One of the most frequently asked questions about the subprime market
meltdown and housing crisis is: How did the government get so deeply
involved in the housing market?

IBD Exclusive Series: What Caused The Loan Crisis?

The answer is: President Clinton wanted it that way.

Fannie Mae and Freddie Mac, even into the early 1990s, weren't the
juggernauts they'd later be.

While President Carter in 1977 signed the Community Reinvestment Act, which
pushed Fannie and Freddie to aggressively lend to minority communities, it
was Clinton who supercharged the process. After entering office in 1993, he
extensively rewrote Fannie's and Freddie's rules.

In so doing, he turned the two quasi-private, mortgage-funding firms into a
semi-nationalized monopoly that dispensed cash to markets, made loans to
large Democratic voting blocs and handed favors, jobs and money to
political allies. This potent mix led inevitably to corruption and the
Fannie-Freddie collapse.

Despite warnings of trouble at Fannie and Freddie, in 1994 Clinton unveiled
his National Homeownership Strategy, which broadened the CRA in ways
Congress never intended.

Addressing the National Association of Realtors that year, Clinton bluntly
told the group that "more Americans should own their own homes."
He meant it.

Read the rest at:

http://ibdeditorial.com/IBDArticles.aspx?id=307149667289804#

Ed

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