Former President Jimmy Carter said on Friday the “atrocious economic policies” of the Bush administration had caused the worst global financial crisis since the Great Depression of the 1930s.
Carter told reporters on a stopover in Brussels that “profligate spending,” massive borrowing and dramatic tax cuts since President George W. Bush took office in 2001 were behind the market turmoil and economic crisis.
“I think it’s because of the atrocious economic policies of the Bush administration,” said the 84-year-old Democrat, who served in the White House from 1977-1981 during a period of high inflation and energy crisis.
Whoever wins next month’s U.S. presidential election would inherit economic problems that would force them to postpone implementing some of their proposed reforms, he said.
“The economic situation is an entrenched problem. It is going to take years to correct what has been done economically,” Carter said, adding he hoped Democrat Barrack Obama would win and immediately improve Washington’s image in the world.
Let’s not forget that the Peanut Farmer, whatever his virtues as a good human being may be, was kicked out of the White House on the basis of the economy. Under Carter, unemployment went over 10 percent and there were double digit inflation rates, double digit interest rates and double digit unemployment. Let’s also not forget who passed the community reinvestment act, the legislation responsible for this disaster.
Carter calling out Bush is like a me telling a guy who placed third in a marathon that he is not a fast enough runner.
Alright, to recap, the Community Reinvestment Act (CRA 1977) gave an opening for subprime lending. The CRA encouraged banks to lend money to high risk borrowers with the noble notion that it would enable more Americans to be homeowners. Unfortunately, it was undefined for a very long time and that gave community organizing groups such as ACORN to push the boundaries of the law and engage in coercive methods of forcing banks to loan to high risk borrowers. They would threaten to block mergers and expansions of banks unless the banks would dole out these risky loans. In addition, numerous suits were brought against banks alleging that the banks engaged in discriminatory lending phasing out African Americans from loans in an attempt to bully banks into doling out high risk loans.
One such suit was Buycks-Roberson v. Citibank Federal Sav. Bank, 162 F.R.D. 322 (N.D. Ill. 1995). This case is most notable for one of the members of counsel representing Selma Buycks-Roberson, Calvin R. Roberson and Rene Brooks. That attorney was a young lawyer named BARACK H. OBAMA.
According to the record, the plaintiffs, all African-Americans sued Citibank for seeking redress for alleged racial discrimination with regard to loan applications.
Ms. Buycks Roberson had applied for a loan to refinance her existing mortgage but was denied because her income did not support the amount of credit requested.
Obama and friends presented evidence noting that Citibank denied refinancing “to only 19% of upper-income applicants living in areas with less than 10% minority population,” while Citibank denied loans to 49& of ALL applicants living in areas of 80-100% minority population. BHO and friends also asserted that 780 minority applications were denied by Citibank in between 1992 and 1993.
Citibank asserted that their underwriting procedure was race-neutral, however the court certified the class regardless.
As a result of the court’s analysis, the court certified a class of “all African-Americans who filed applications for home loans to Citibank on or after July 6, 1992, and whose applications were rejected because they were African-American and/or the racial composition of the neighborhood in which their properties were located were African-American.
While it is very somewhat possible that these loans were denied because of a racial impetus, it is much more likely that the loans were denied because of the stated reason – the individuals’ incomes were insufficient to cover to cover the loans in light of their credit history. In addition, it would be improper for a bank to invest in a loan where the borrowers would be unlikely to pay the loan back and, if they defaulted, the value of the home would not equal the value of the loan.
The, the thing we have to remember, a friend of mine who is very close to the financial community in New York pointed out that Democrats have a lot of the responsibility for this as well. I mean, it was Clinton who killed the Glass-Steagall, and it happened under a Democratic president. Barney Frank and his committee, they, they kept propping up Fannie Mae and Freddie Mac saying everything’s fine, everything’s fine, everything’s good. And it was his job to know everything wasn’t fine. And Barney Frank let you down and let us down as well. And so, but I want to say there’s blame to go both ways. But I will say, I want to, I maybe keep beating this to death, but I still think anyone in this Congress who voted to add $140 billion to that bill, they should be ashamed of themselves. That is a disgrace. It’s a disgrace. This Congress is a disgrace, Democrat and Republican.
As we all know, he is completely wrong on Glass-Steagall as subprime had already started. It is interesting to see Jack Donaghy (Alec Baldwin’s Republican character on 30 Rock) inform the usually super-liberal Alec Baldwin’s opinion
Stanley Kurtz has a great article detailing the history of ACORN and its ties to the financial meltdown. Here is the Cliffs Notes version of his work
ACORN intimidated banks into making high-risk loans to low-credit customers using provisions of the 1977 Community Reinvestment Act (CRA). Chicago ACORN was able to delay and halt the efforts of banks to merge or expand until they had agreed to lower their credit standards and to obtain “counseling” compensation.
Heidi Swarts, a strong supporter of ACORN and author of Organizing Urban America, notes that ACORN members think of themselves as “militants unafraid to confront the powers that be” and ACORN protesters break into private offices, show up at a banker’s home to intimidate his family, or pour protesters into bank lobbies to scare away customers, all in an effort to force a lowering of credit standards for poor and minority customers.
The 1977 Community Reinvestment Act forced banks to increase lending in poor and minority neighborhoods, but its exact requirements were vague and open to interpretation. Bank mergers or expansion plans were rarely held up under CRA until the late 1980s, when ACORN perfected its technique of filing CRA complaintsand intimidated representatives of banks.
A provision of the 1989 savings and loan bailout pushed by Democratic legislators, like Joseph P. Kennedy, required lenders to compile public records of mortgage applicants by race, gender, and income. The statistics produced by these studies were presented in highly misleading ways and groups like ACORN were able to use them to embarrass banks into lowering credit standards.
IN 1991, House Democrat Henry Gonzales had announced that Fannie and Freddie had agreed to commit $3.5 billion to low-income housing in 1992 and 1993, in addition to a just-announced $10 billion “affordable housing loan program” by Fannie Mae.
A mere month later, ACORN Housing Corporation president, George Butts made news by complaining to a House Banking subcommittee that ACORN’s efforts to pressure banks using CRA were still being hamstrung by Fannie and Freddie. Butts also demanded still more data on the race, gender, and income of loan applicants. Many news reports over the ensuing months point to ACORN as the key source of pressure on congress for a further reduction of credit standards at Fannie Mae and Freddie Mac. As a result of this pressure, ACORN was eventually permitted to redraft many of Fannie Mae and Freddie Mac’s loan guideline.
In the Clinton administration, Clinton Housing Secretary Henry Cisnersos pledged to meet monthly with ACORN representatives.
At this point, both ACORN and the Clinton administration were working together to impose large numerical targets or “set asides” (really a sort of poor and minority loan quota system) on Fannie and Freddie. ACORN called for at least half of Fannie and Freddie loans to go to low-income customers. At first the Clinton administration offered a set-aside of 30 percent.
In early 1994, the Clinton administration floated plans for committing $1 trillion in loans to low- and moderate-income home-buyers, which would amount to about half of Fannie Mae’s business by the end of the decade.
In June of 1995, President Clinton, Vice President Gore, and Secretary Cisneros announced the administration’s comprehensive new strategy for raising home-ownership in America to an all-time high. Representatives from ACORN were guests of honor at the ceremony. In his remarks, Clinton emphasized that: “Out homeownership strategy will not cost the taxpayers one extra cent. It will not require legislation.” Clinton meant that informal partnerships between Fannie and Freddie and groups like ACORN would make mortgages available to customers “who have historically been excluded from homeownership.”
At both the local and national levels, then, ACORN served as the critical catalyst, levering pressure created by the Community Reinvestment Act and pull with Democratic politicians to force Fannie Mae and Freddie Mac into a pattern of high-risk loans.
In addition to Stanley Kurtz’s work, Michelle Malkin has more on this on her site.
If the Messiah wins, we will have a liberal house, a liberal senate and a liberal executive. Not a good sign for any economic conservative out there. James Pethokoukis dissects parts of a possible Obama economy.
1) Direct refinancing for homeowners.
2) Direct government involvement in the management of failing financial institutions that are recapitalized by government money, through something like the Reconstruction Finance Corporations of the Roosevelt era.
3) A transfer tax on stock and bond transactions, both to raise needed revenue and to damp down the kind of speculation that led to the meltdown.
4) Substantial public spending to pull the wider economy out of the hole. Most of that can be raised by surtaxes on the wealthy and by transaction taxes on speculation, but it will also require a temporary increase in public deficits.
5) Raise enough revenue to cover about $700 billion of financial recapitalization in year one, and in years two through eight use the proceeds for public works, infrastructure, good jobs, universal health coverage, expanded pre-kindergarten and child care.
How is he going to pay for all this new spending? He promised not to raise taxes on any couple making under 250,000 and any single person making under 200,000 and the Messiah would not lie about that right? At the Barackropolis, the Messiah said he would pay for any new spending “by closing corporate loopholes and tax havens.” Factcheck noted the fallacy in this. They estimate that his supposed tac cuts (economic redistribution) will cost government 130 billion in revenue, but closing tax loopholes (he doesn’t know what that means) would generate only 80 billion.
In order to pay for this massive increase in the size of government, there are two possible options. One, Barack lied and middle class taxes go up also. Big Time. Alternatively, McCain’s assertion that an Obama presidency would be Jimmy Carter’s second term becomes a self-fulfilling prophecy. We could see hikes in the payroll tax and 70 percent marginal tax rates for top income earners. This could encourage flight from the U.S. to other areas such as Canada or Britain where tax rates would be lower. Higher taxes also empower creation of new tax shelters.
Also note that countries with higher marginal tax rates suffer ridiculously high levels of unemployment
Right now we are hovering around 6% unemployment. At the end of the Carter administration it was over 12%. Higher taxes will lead to lower hours for wage earners and early retirement for employers who don’t see a point in working 9 months out of the year to pay federal taxes. Let’s not forget, state and city taxes as well as sales, payroll, capgains, etc.
Our current economic crisis is a good case in point. What was his actual record in the years before the great economic crisis of our lifetimes?
This crisis started in our housing market in the form of subprime loans that were pushed on people who could not afford them. Bad mortgages were being backed by Fannie Mae and Freddie Mac, and it was only a matter of time before a contagion of unsustainable debt began to spread. This corruption was encouraged by Democrats in Congress, and abetted by Senator Obama.
Senator Obama has accused me of opposing regulation to avert this crisis. I guess he believes if a lie is big enough and repeated often enough it will be believed. But the truth is I was the one who called at the time for tighter restrictions on Fannie Mae and Freddie Mac that could have helped prevent this crisis from happening in the first place.
Senator Obama was silent on the regulation of Fannie Mae and Freddie Mac, and his Democratic allies in Congress opposed every effort to rein them in. As recently as September of last year he said that subprime loans had been, quote, “a good idea.” Well, Senator Obama, that “good idea” has now plunged this country into the worst financial crisis since the Great Depression.
To hear him talk now, you’d think he’d always opposed the dangerous practices at these institutions. But there is absolutely nothing in his record to suggest he did. He was surely familiar with the people who were creating this problem. The executives of Fannie Mae and Freddie Mac have advised him, and he has taken their money for his campaign. He has received more money from Fannie Mae and Freddie Mac than any other senator in history, with the exception of the chairman of the committee overseeing them.
Did he ever talk to the executives at Fannie and Freddie about these reckless loans? Did he ever discuss with them the stronger oversight I proposed? If Senator Obama is such a champion of financial regulation, why didn’t he support these regulations that could have prevented this crisis in the first place? He won’t tell you, but you deserve an answer.
We’ll know this worked if, by the time 8:00 rolls around, flapping heads are picking this apart for supposed innacuracies. Stand up and kick some tail!
Liberals have been arguing that the root of the financial crisis is the repeal of the Glass-Steagall Act of 1933 by the passage of the Gramm-Leach-Bliley Act which they allege led to masssive deregulation which they say caused the mortgage crisis. We, on the other hand track this mess back to the Carter Administration and the Community Reinvestment Act which forced lending institutions to lend “equitably” to those in their communities. The lending standards were lowered during the Clinton administration. Sebastian Mallaby writes in WaPo
The key financiers in this game were not the mortgage lenders, the ratings agencies or the investment banks that created those now infamous mortgage securities. In different ways, these players were all peddling financial snake oil, but as Columbia University‘s Charles Calomiris observes, there will always be snake-oil salesmen. Rather, the key financiers were the ones who bought the toxic mortgage products. If they hadn’t been willing to buy snake oil, nobody would have been peddling it.
Who were the purchasers? They were by no means unregulated. U.S. investment banks, regulated by the Securities and Exchange Commission, bought piles of toxic waste. U.S. commercial banks, regulated by several agencies, including the Fed, also devoured large quantities. European banks, which faced a different and supposedly more up-to-date supervisory scheme, turn out to have been just as rash. By contrast, lightly regulated hedge funds resisted buying toxic waste for the most part — though they are now vulnerable to the broader credit crunch because they operate with borrowed money.
In the early 1990s, reports Stanley Kurtz, senior fellow at the Ethics and Policy Center, Obama was personally recruited by Chicago’s ACORN to run training sessions in “direct action.” That’s the euphemism for the techniques used under the cover of the federal Community Reinvestment Act to intimidate financial institutions into giving what have been called “Ninja” loans — no income, no job, no assets — to people who couldn’t afford them.
CRA was designed to increase minority homeownership. Whenever a bank wanted to grow or expand, ACORN would file complaints that it was not sufficiently sensitive to the needs of minorities in providing home loans. Agitators would then be unleashed.
Chicago’s ACORN used Alinsky’s tactics against institutions such as Bell Federal Savings and Loan and Avondale Federal Savings. In September 1992, the Chicago Tribune described the group’s agenda as “affirmative action lending.”
Obama also helped ACORN get funding. When he served on the board of the Woods Fund for Chicago with Weather Underground terrorist William Ayers, the Woods Fund frequently gave ACORN grants to fund its activist agenda.
In 1995, Kurtz reports, Obama chaired the committee that increased funding of ACORN and other community organizers. The committee report boasted that the fund’s “non-ideological” image “enabled the Trustees to make grants to organizations that use confrontational tactics against the business and governmental ‘establishments’ without undue risk of being accused of partisanship.”
The CRA empowered regulators to punish banks that failed to “meet the credit needs” of “low-income, minority and distressed neighborhoods.” It gave groups such as ACORN a license and a means to intimidate banks, claiming they were “redlining” poor and minority neighborhoods. ACORN employed its tactics in 1991 by taking over the House Banking Committee room for two days to protest efforts to scale back the CRA.
As a former White House staff economist writes in the American Thinker, Obama represented ACORN in a 1994 suit against redlining. ACORN was also a driving force behind a 1995 regulatory revision pushed through by the Clinton administration that greatly expanded the CRA and helped spawn the current financial crisis.
Obama was the attorney representing ACORN in this effort. Last November, he told the group, “I’ve been fighting alongside ACORN on issues you care about my entire career.” Indeed he has. Obama was and is fully aware of what ACORN was doing with the money and expertise he provided. The voters should be aware on Nov. 4 of the roles of both in creating the current crisis.
While I was at the gym during lunch, one of the TV’s had Fox on and they were talking about ACORN with Former Ohio Secretary of State Ken Blackwell. While it was interesting stuff, I couldn’t help but notice that none of the other TV’s, which had CNBC, CNN and MSNBC on, had anything about ACORN. CNN had something about Palin, CNBC had people talking about failout and MSNBC was playing “Stairway to Heaven” backwards.
Found this linked from Redstate. It is pretty much a verbal distillation of what went wrong. From the adam smith blog:
Anti-redlining laws in the US, passed in 1977 and strengthened in 1995, forced lenders to give mortgages to people they knew might not be able to afford repayments. People who haven’t had a full-time job in years were lent six figure sums.
In order to manage the risk this exposed them too, lenders packaged these sub-prime mortgages up with other ones and traded them as derivatives (collateral debt obligations, or CDOs).
People start to default on mortgages, but because the CDOs are so opaque, no one knows how much liability they, or others, are exposed to. So the banks stop lending to each other and the credit crunch begins.
Now the banks which have overextended themselves – lending far more money than they have in deposits, and relying on being able to borrow cheaply to finance their business model – are in serious trouble. Ultimately, it’s a cash flow problem.
Word gets out and Britain witnesses the first run on a bank in over 100 years. Confidence evaporates on both sides of the Atlantic. Share prices plummet, as one bank after another is infected. Investment banks, which do not take deposits and therefore rely most heavily on the ability to borrow, are hardest hit.
Two possible policy responses emerge. One, motivated by the idea of moral hazard, says that banks must be allowed to fail. If government bails them out, they’ll behave even more riskily in future. Plus, why should the taxpayers fund a welfare state for bankers? The other school of thought stems from the idea of systemic risk, that allowing banks to collapse would endanger the entire financial system (and, by extension, the capitalist economy).
Fears about systemic risk win out. Governments intervene to try and restore confidence. In the US, the Bush administration attempts to buy up all the bad debt, aiming to get banks lending to each other again.
This what happens when a bubble bursts. For years, the availability of cheap consumer goods from emerging economies like India and China kept down inflation. This meant governments and central banks thought they could flood the market with liquidity (i.e. cheap credit) and get away with it. They couldn’t. With too much money chasing too few goods, an asset bubble built up. House prices, in particular, were hugely over-inflated. It got worse after 9/11 when, facing an economic downturn, the US and the UK both pumped even more liquidity into the market. With breathtaking arrogance, politicians claimed to have abolished the economic cycle. In reality, they had simply swapped an immediate and relatively minor readjustment for a much harder landing several years down the line.
Trust, But Verify 