The social engineering program known as the Community Redevelopment Act and pressure from federal officials —not greed or capitalism—has caused the current financial problems.
Fort Worth, TX (WiredPRNews.com)—Social engineering, not capitalistic greed, led to the mortgage meltdown that we are seeing unfold on Wall Street.
According to a September 15, 2008 editorial from Investor’s Business Daily.com, a diversity-obsessed Clinton administration forced mortgage lenders to extend credit to those in high-risk areas or face federal penalties.
Passed during the Carter Administration, the Community Redevelopment Act was designed to boost minority home ownership and former President Bill Clinton put the program into high gear by attaching penalties to mortgage lenders who did not make loans in financially risky areas, according to the editorial.
However, lenders look at credit scores and debt-to-income ratios when determining loan eligibility. Regardless of ethnicity, low-income areas tend to have people who have —surprise— low incomes and poor credit scores. The result of the politically-correct actions of the Clinton administration were that many people who would not normally qualify for mortgages, not only got mortgages but defaulted on them. This resulted in the fiasco that we are in now because the mortgage lenders were unable to collect the payments.
The loans had the implied guarantee of the government-created agencies Freddie Mac and Fannie Mae, which was run by Franklin Raines from 1999 to 2005. Raines, an advisor to Democrat Presidential candidate Barack Obama, pocketed close to $100 million of taxpayer dollars, according to the editorial, by providing false earnings data and using shady accounting tricks.
The Investors Business Daily editorial stated that the accounting mess at Freddie Mac resulted in the Security Exchange Commission assessing a $400 million fine on the institution. The settlement with the SEC also required Freddie Mac to change its accounting practices, but, according to the editorial, it was too little too late.