It actually started in 1977 with James Earl Carter Jr. and the Community Reinvestment Act (CRA), and it still exists today. In a nutshell, Banks are leaned on by Federal Regulators to increase lending in certain areas and to people with lower income and credit scores. These regulators check the books annually to make sure the banks meet the guidelines of the CRA. If it doesn't, the bank is threatened with different fines and are not permitted to expand until they bring up their CRA numbers. Banks complain that they are making mortgages and loans that have a high chance to end up as bad debt (foreclosure and default). Doesn't matter if the bank has standards of lending - they must meet CRA guidelines.
The mortgage meltdown was closer in relationship to the repeal of the Glass-Steagall Act of 1933. This act prevented banks from taking depositors money and investing in various speculative vehicles like mortgage backed securities. Alan Greenspan was instrumental in getting Bill Clinton and Congress to repeal Glass-Steagall. Once that was done, mortgage companies sprang up by the hundreds, with Community Reinvestment Act guidelines, started doing little documentation mortgages, then selling off the mortgages to investment houses, who in turn bundled them as investment securities, thinking there was little chance of a downturn for the investor. However, many of these houses were worth less than what was owed on them, and the owners with poor credit and little money just walked away from them allowing foreclosure.
So, when you hear that it's just greedy capitalist bankers who created all these problems, remember it was laws and repeal of laws by Democrats who started this.
Last edited by OH58D; 01-22-20 at 16:12.
Maj. USAR (Ret) 160th SOAR, 2/17 CAV
NRA Life Member
Black Mesa Ranch. Raising Fine Cattle and Horses in San Miguel County since 1879
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