Clinton Library document dump reveals 'subprime bubble' responsibility

One of the great triumphs of progressive propaganda was sticking responsibility for the subprime mortgage bubble on “de-regulation” and ultimately capitalism itself. In fact, the origins of the crisis in mortgage backed derivatives goes back to the Clinton administration and the Community Reinvestment Act, which virtually forced mortgage lenders into making loans to people who could not pay them back.

Investor’s Business Daily is not fooled, and in an editorial, the publication highlights an overlooked item in the recent release of presidential papers from the Clinton Library which helps set the record straight:

Newly released memos from the Clinton presidential library reveal evidence the government had a big hand in the housing crisis. The worst actors were in the White House, not on Wall Street.

During the 1990s, former Clinton aides bragged that more aggressive enforcement of the Community Reinvestment Act pressured banks to issue riskier mortgages, lending more proof the anti-redlining law fueled the crisis.

A 2012 National Bureau of Economic Research study found "that adherence to that act led to riskier lending by banks," with "a clear pattern of increased defaults for loans made by these banks in quarters around the (CRA) exam, (and) the effects are larger for loans made within CRA tracts," or low-income and minority areas.

To satisfy CRA examiners, Clinton mandated "flexible" lending by large banks. As a result, CRA-approved loans defaulted about 15% more often, the NBER found.

Exhibit A in the 7,000-page Clinton Library document dump is a 1999 memo to him from his treasury secretary, Robert Rubin.

"Public disclosure of CRA ratings, together with the changes made by the regulators under your leadership, have significantly contributed to ... financial institutions ... meeting the needs of low- and moderate-income communities and minorities," Rubin gushed. "Since 1993, the number of home mortgage loans to African Americans increased by 58%, to Hispanics by 62% and to low- and moderate-income borrowers by 38%, well above the overall market increase.

"Since 1992, nonprofit community organizations estimate that the private sector has pledged over $1 trillion in loans and investment under CRA."

Other documents reveal how the community-activist group ACORN and other organizations met with Rubin and other top Clinton aides on "improving credit availability for minorities."

Left to itself, capitalism has many self-correcting mechanisms that either guide mistaken actors back to sanity, or eliminate them. The worst situations arise in mixed forms, or “guided capitalism” as it is sometimes called, when governments distort markets, eliminate feedback mechanisms (such as bankruptcy – see the Wall Street bailouts), and then blame the resulting crisis on capitalism, and demand even more government power.

One of the great triumphs of progressive propaganda was sticking responsibility for the subprime mortgage bubble on “de-regulation” and ultimately capitalism itself. In fact, the origins of the crisis in mortgage backed derivatives goes back to the Clinton administration and the Community Reinvestment Act, which virtually forced mortgage lenders into making loans to people who could not pay them back.

Investor’s Business Daily is not fooled, and in an editorial, the publication highlights an overlooked item in the recent release of presidential papers from the Clinton Library which helps set the record straight:

Newly released memos from the Clinton presidential library reveal evidence the government had a big hand in the housing crisis. The worst actors were in the White House, not on Wall Street.

During the 1990s, former Clinton aides bragged that more aggressive enforcement of the Community Reinvestment Act pressured banks to issue riskier mortgages, lending more proof the anti-redlining law fueled the crisis.

A 2012 National Bureau of Economic Research study found "that adherence to that act led to riskier lending by banks," with "a clear pattern of increased defaults for loans made by these banks in quarters around the (CRA) exam, (and) the effects are larger for loans made within CRA tracts," or low-income and minority areas.

To satisfy CRA examiners, Clinton mandated "flexible" lending by large banks. As a result, CRA-approved loans defaulted about 15% more often, the NBER found.

Exhibit A in the 7,000-page Clinton Library document dump is a 1999 memo to him from his treasury secretary, Robert Rubin.

"Public disclosure of CRA ratings, together with the changes made by the regulators under your leadership, have significantly contributed to ... financial institutions ... meeting the needs of low- and moderate-income communities and minorities," Rubin gushed. "Since 1993, the number of home mortgage loans to African Americans increased by 58%, to Hispanics by 62% and to low- and moderate-income borrowers by 38%, well above the overall market increase.

"Since 1992, nonprofit community organizations estimate that the private sector has pledged over $1 trillion in loans and investment under CRA."

Other documents reveal how the community-activist group ACORN and other organizations met with Rubin and other top Clinton aides on "improving credit availability for minorities."

Left to itself, capitalism has many self-correcting mechanisms that either guide mistaken actors back to sanity, or eliminate them. The worst situations arise in mixed forms, or “guided capitalism” as it is sometimes called, when governments distort markets, eliminate feedback mechanisms (such as bankruptcy – see the Wall Street bailouts), and then blame the resulting crisis on capitalism, and demand even more government power.

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