Sunday, October 12, 2008

Republicans Played Active Role In Subprime Loan Mess



"One of the larger obstacles to minority home ownership is financing. Fannie Mae and Freddie Mac have committed to provide more money for lenders, they've committed to meet the shortage of capital available for minority home buyers..." -George W. Bush

Yes, that was President Bush in 2002 extolling Fannie Mae and Freddie Mac's services in helping provide subprime loans to minorities. Last time I checked, Bush is a Republican. I state that because a myth has grown among right-wing commentators that the Democrats are solely to blame for the mortgage mess. That simply doesn't square with the facts.

Bush didn't make idle talk in his comments above (and by the way, does anyone know which Scandinavian language is shown in the video subtitles?). His administration and party, with their love of deregulation, played an active role in allowing risky loans. An excellent article in Newsvine, "The Republican Roots of the Subprime Crisis" (10/1/08), surveys Republican involvement:

• President Bush's "America's Home Ownership Challenge" pushed the private lending sector (as well as Fannie Mae and Freddie Mac) to make more than 5.5 million new minority and low income mortgage loans. To meet his challenge to the private lending industry, twenty four of our largest banking and lending companies pledged to make 1.1 trillion dollars in low income and minority loans.

• From Bush Administration’s White House Press Release entitled, "Focusing on the Nation’s Priorities – Meeting America’s Housing Needs": In 2002, the President issued America’s Homeownership Challenge to increase first-time minority homeowners by 5.5 million through 2010. ... In 2006, 31 percent of those using FHA mortgages were minorities purchasing their first home. The 2008 Budget continues Administration efforts to modernize FHA by improving its ability to reach traditionally underserved homebuyers...

• While in Georgia in 2002, Bush made a speech in which he directly stated, "One of the barriers to homeownership is the inability to make a downpayment. And if one of the goals is to increase homeownership, it makes sense to help people pay that downpayment. ...Fannie May and Freddie Mac, as well as the federal home loan banks, will increase their commitment to minority markets by more than $440 billion.

• On December 16, 2003, President Bush signed into law the American Dream Downpayment Act of 2003, which will help approximately 40,000 families a year with their down payment and closing costs, and further strengthen America’s housing market. This legislation complements the President’s aggressive housing agenda announced in 2002 to dismantle the barriers to homeownership. (From White House Press Release "American Dream Downpayment Act of 2003 – Expanding Homeownership Opportunities for All).

• The Republican administration had HUD offer "zero down payment" mortgages, and risky 3, 5, and 7-year adjustable rate mortgages.

• Of course, these goals were reiterated in the 2004 GOP platform: The most significant barrier to homeownership is the down payment. We support efforts to reduce that barrier, like the American Dream Downpayment Act and Zero Downpayment Mortgages.

• It was the Gramm Leach Bliley Act that allowed banks to deal in mortgage-backed securities. Without passage of the GLBA by a Republican-controlled Congress, the subprime mess couldn't have happened. Chief architect of the GLBA? John McCain's economic adviser, Phil Gramm. Yes, that Phil Gramm. The GLBA was passed on a vote split along party lines (John McCain voted "aye," by the way).

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