The root cause of the crisis is the housing foreclosure crisis, and what caused that, loans to unqualified individuals, loans made by the Government Sponsored Enterprises(GSE) Fannie MAe and Freddie Mac. Yes, the federal government forced home mortgage loans to be made to people who had no means to pay them back, that’s what a sub-prime mortgage is. People who had no stake in America, people who were here illegally. As interest rates climbed, gas prices rose, food prices rose, the party ended.
And what forced the demands for unqualified loans, Pres Jimmy Carter’s Community Reinvestment Act (CRA) of 1977. Who was the enforcer of the CRA, that would be people like Barack Obama, your helpful Community Organizer from the voter fraud group ACORN.
Thomas Sowell is always a good read.
Among the Congressional “leaders” invited to the White House to devise a bailout “solution” are the very people who have for years created the risks that have now come home to roost.
Five years ago, Barney Frank vouched for the “soundness” of Fannie Mae and Freddie Mac, and said “I do not see” any “possibility of serious financial losses to the treasury.”
Moreover, he said that the federal government has “probably done too little rather than too much to push them to meet the goals of affordable housing.”
Earlier this year, Senator Christopher Dodd praised Fannie Mae and Freddie Mac for “riding to the rescue” when other financial institutions were cutting back on mortgage loans. He too said that they “need to do more” to help subprime borrowers get better loans.
In other words, Congressman Frank and Senator Dodd wanted the government to push financial institutions to lend to people they would not lend to otherwise, because of the risk of default.
And that folks, is the root of the current financial crisis. So what is to be done. We have a data point:
Here is a short video of one of the hearings in 2004 where the Fannie Mae and Freddie Mac regulator was explaing that Fannie and Freddie were going out of control with bad paper. Demcorats in their own words.