Byron York: Democrats on path to repeat housing disaster (Updated) :: Political News and commentaries

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September 22, 2009

Byron York: Democrats on path to repeat housing disaster (Updated)

Topics: Political News and commentaries

In their September 23, 2008 WSJ article titled, "Blame Fannie Mae and Congress For the Credit Mess, Charles Calomiris and Peter Walliston explained that the vast accumulation of toxic mortgage debt that poisoned the global financial system was driven by "an affordable housing mission (via the Community Reinvestment Act)," the aggressive buying of subprime and Alt-A mortgages, and mortgage-backed securities - by Fannie Mae and Freddie Mac. And as Byron York reported in on September 16th of this month, a number of experts believe that aggressive enforcement of the 1970s-era Community Reinvestment Act contributed to the mortgage meltdown, and thus to the greater financial crisis, by requiring financial institutions to lend to unqualified borrowers.

Now it seems that the Democrats have once again embarked on the same path toward a financial meltdown - giving us more of the same but this time on steroids.

Today, in his most recent piece on the topic, Byron York writes:

[...] Democratic majorities are pressing hard to expand some of the very policies that led to the reckless home lending that in turn helped lead to the great financial meltdown. If Chairman Barney Frank and his fellow Democrats have their way, we'll do it all again -- and more.

At issue last week was H.R. 1479, the Community Reinvestment Modernization Act of 2009, sponsored by Democratic Rep. Eddie Bernice Johnson. It would expand and strengthen the 1977 Community Reinvestment Act, which required banks to make loans in low-income areas that many lenders had traditionally shunned.

After the meltdown, some conservatives blamed the CRA for almost solely causing the crisis by requiring banks to make risky loans to unqualified borrowers. It was an unfair charge. "CRA had at best an incremental role in the U.S. housing debacle," says J.D. Foster, an economist at the Heritage Foundation. But CRA did help create the conditions in which disaster could occur.

[...] Now, Johnson's bill would ensure more of that by applying CRA's lending requirements not just to banks but to non-bank institutions like credit unions, insurance companies, and mortgage lenders. It would also make CRA explicitly race-based by, in Johnson's words, "requiring CRA exams to explicitly consider lending and services to minorities in addition to low- and moderate-income communities."

[...] Denying that CRA, Fannie and other institutions played any role in setting the stage for disaster, they're (the Democrats) proposing more of what helped get us into trouble in the first place.

Read it all ...

As bad as the Dems new plans seem, lets not forget the ACORN angle, since the organization has used the Community Reinvestment Act to pressure banks to pour money into ACORN and its affiliates, allowing ACORN to facilitate loans to clearly unqualified borrowers.

Don't you think it's time now to call your senator and Representative, and tell them by phone and email - to vote No to the Community Reinvestment Modernization Act of 2009!

Related Video: Government Intervention, Regulatory Policy, and the Financial Crisis.

Also watch: Burning Down The House: What Caused Our Economic Crisis? Bombshell

Update: Several emails from readers suggest putting the above-linked, pre-2008 election video up because it spells out very interesting issues involving Barack Obama. So here it is, saving a click.