Thread: Carter More to Blame for Crisis Than Bush or McCain

IBD: Carter More to Blame for Financial Crisis Than Bush or McCain
By Noel Sheppard (Bio | Archive)
September 20, 2008 - 16:29 ET

Much as Bush-hating media members conveniently ignore historical events that led to the invasion of Iraq in March 2003, their current finger-pointing at the White House, John McCain, and all Republican politicians for the collapse of the financial services industry lacks any honest assessment of decades-old legislation that laid the groundwork for today's problems.

In particular, 1977's Community Reinvestment Act which required banks and savings institutions to make loans to the lower-income areas in the communities they served.

Despite how integrally tied the current crisis is to this bill enacted by a Democrat-controlled Congress and signed into law by Jimmy Carter, no major media outlet other than Investor's Business Daily and National Review Online mentioned it during last week's market meltdown.

Going against the grain was a highly-informative editorial by IBD Thursday (emphasis added, h/t NBer Gary Hall, photo courtesy About.com):

To hear today's Democrats, you'd think all this started in the last couple years. But the crisis began much earlier. The Carter-era Community Reinvestment Act forced banks to lend to uncreditworthy borrowers, mostly in minority areas.

Age-old standards of banking prudence got thrown out the window. In their place came harsh new regulations requiring banks not only to lend to uncreditworthy borrowers, but to do so on the basis of race.

These well-intended rules were supercharged in the early 1990s by President Clinton. Despite warnings from GOP members of Congress in 1992, Clinton pushed extensive changes to the rules requiring lenders to make questionable loans. [...]

Failure to comply meant your bank might not be allowed to expand lending, add new branches or merge with other companies. Banks were given a so-called "CRA rating" that graded how diverse their lending portfolio was. [...]

In the name of diversity, banks began making huge numbers of loans that they previously would not have. They opened branches in poor areas to lift their CRA ratings.

Meanwhile, Congress gave Fannie and Freddie the go-ahead to finance it all by buying loans from banks, then repackaging and securitizing them for resale on the open market.

That's how the contagion began.

With those changes, the subprime market took off. From a mere $35 billion in loans in 1994, it soared to $1 trillion by 2008.

Readers are strongly encouraged to review this entire fact-filled piece to not only better understand the roots of today's financial crisis, but also to get a sense as to just how absurd media accusations of this all being Bush and McCain's fault are.

That said, from 1989 through 1995, I managed branches for two savings and loans: Imperial Savings, which got taken over by the Resolution Trust Corporation during the S&L bailout, and; Great Western Bank which eventually was purchased by Washington Mutual.

The pressure to comply with CRA was astounding, especially at Great Western as it was expanding throughout the country. Its ability to acquire other institutions was directly related to its CRA rating.

With this in mind, IBD's views concerning this matter are spot on raising a very important question: if the role of news media is to inform the public, why does a LexisNexis search indicate that as this crisis came to a head last week, its connection to CRA, Jimmy Carter, and Bill Clinton was almost completely ignored?

Would such a revelation make it difficult for Obama-loving press outlets to point fingers at George W. Bush and, more importantly, John McCain?

Yes, that's a rhetorical question.

—Noel Sheppard is the Associate Editor of NewsBusters.

http://newsbusters.org/blogs/noel-shepp ... -or-mccain

And to think....I was a major Carter supporter......NOT anymore.

I was!!!! i LOVED CARTER, I HAVE LETTERS FROM HIM......SORRY FOR THAT...

Yes, and Ron Paul said on Glenn Beck the other night that it really all started in 1913. But when we no longer backed our money with gold and went to a fiat (sp?) system (1960's ?) we were in real danger. That is why this will be worse than the great depression. In the great depression prices went down when we backed our money with gold. Now we just print money that makes the value of our dollar go down. Consequently our assets will be worth less but everything will cost us more. So it won't stabilize like it did with the great depression.

You probably have a better handle on the dates etc. But you get my drift.

I would love to read the documents from Papa, Clinton and George Bush administrations. And if it was really Carter's doing that started the problem in the first place, why did the following administrations have not the foresight to see this was heading in the wrong direction? Well, I might as well forget about ever seeing any documents from the GWB admin. as probably those will be sealed under either national security or executive privilege.

Carter is to blame, that is wrong, and I am not a Carter fan.

So the presidents after 1981 are truly dumb for ignoring Carter's blunders.

There is Reagan, Bush Sr., Clinton, Bush now and they all couldn't fix Carter's blunders, please.

Who is going to fix the 1986 I-9 blunder? Letting illegals have jobs.

And will anyone ever fix the 14th Amendment concerning illegals born in America?