What REALLY Caused The Current Financial Crisis? posted 9/20/2008 9:12:25 PM | 4 kudos what's this?     report abuse

DiamondRain

Did you notice how Obama and the Democrats tried to parlay a few down days in the stock markets into a Marxist revolution?

What really caused this crisis?

We all know it was caused by a huge number of people who bought homes and, for whatever reason did not pay the lenders back for the money they borrowed.

But why would someone lend you money if they knew you didn't have the means to pay it back? The answer is because there were laws passed that REQUIRED THEM TO.

The lion's share of blame for this entire financial crisis belongs to Liberals/Democrats who forced through the Community Reinvestment Act in the late 70s and especially to the Clinton administration.

The act (and similar related ones), FORCED lenders to make loans to people who could not repay them.

Then Bill Clinton and a Democrat Congress liberalized the Act even further in the mid 90s to vastly expand the amount of money that could be loaned and (perhaps most importantly) to allow securitization of these risky loans.

In effect, Clinton caused seriously deficient debt to be deceptively packaged into securities that gave them a legitimacy they didn't deserve. And he also allowed the scope of the bad loans to mushroom to catastrophic proportions.

This act, and the fateful mistakes made by the Clinton administration in compounding the risk led directly to the current crisis.

BTW ... in 2003 President Bush proposed that Fannie Mae and Freddie Mac should be moved to be under the supervision of The Treasury Department. The Democrats opposed this.

Barny Frank (D-MA) said "These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."

Supported by Republicans, but opposed by Democrats, President Bush's recommendation was defeated. Had President Bush's recommendations not been defeated by the Democrats, it is possible that the failure of Fannie & Freddie could have been averted.

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