A Final Chance for Dems

It is very ironic that the Democrats and Obama have an opportunity to fix what they started: the sub-prime mortgage crisis. The entire problem started with the Community Reinvestment Act that was signed under the Carter administration. This act created an incentive for low-income borrowers, however it didn’t work too well. The Act was not much of a problem until 1995 when changes were made under the Clinton administration that forced banks to issue ‘subprime loans.’ So, the only way to turn a profit through selling more mortgages was to offer these loans to all income levels. However, under the new provisions, banks would be fined if they did not issue enough subprime loans.

This Act worked great at aiding more low-income families at giving loans because there was no money down and had variable interest rates. But when interest rates and gas prices rose, low-income houses had to stop paying bills and that meant not paying their mortgage. So, when borrowers stop paying, lenders stop lending, and the housing market collapsed. With only sellers in the market and no buyers, Fannie Mae’s guarantees became worthless and ultimately banks collapsed.

So, why are the Democrats at fault for the housing crisis and ultimately our current recession? Because before the Community Reinvestment Act house prices rose with the inflation rate, and after they skyrocketed, which in no way promoted affordable housing. On three occasions, the Republicans tried to change the CRA, but were stopped by Democrats under the pretense that low-income families would no longer receive loans. Under further examination, numerous ties and connections arise between Obama and Fannie Mae officers who ultimately resigned upon the subprime mortgage crisis. Obama, himself, has even sued banks for not issuing enough loans. So, if Obama is one of the biggest antagonists of our current problem that has lead to a global downturn, why is he in office?

In the end, the problem did not arise through free markets, poor people not paying their debts, or even deregulation, but bad government regulation and exterior motives of the people in power.