I always get a special kick out of people when they professorially insist that the Community Reinvestment Act or Fannie and Freddie (Frank, Dodd, Democrats, etc.) caused the mortgage meltdown.
Unfortunately for me, it's gotten to the point that if I can't laugh in their face in person, I don't bother to make any attempt to convince them otherwise. But since the latest wave of American social and economic justice in the form of protests against Wall Street, a variety of TV pundits and other ignoramuses have come out of the woodwork and continue to lie to the public mostly out of political and economic expediency.
So, I have to ask. IF the Community Reinvestment Act or Fannie and Freddie "forced" banks and mortgage providers to lend beyond their means to home buyers who could not afford - what is stopping them now from lending? The CRA, Fannie and Freddie are all still in play. Banks have greater cash reserves to lend out now than ever before. Nothing has been repealed. Nothing. Since the financial collapse there has been zero reform legislation passed on Fannie and Freddie. Zero, zip, nada. So, I repeat. What is stopping banks and lenders now from borrowing to potential home buyers? Why are people now having such a difficult time qualifying for mortgages? All of the "arm-twisting" federally enforced laws and provisions are still in place. So what is stopping banks, with their arms all twisted into pretzels and their heads squeezed in vices by big bad government, from lending to people who don't qualify today? I'll tell you what's stopping them. Themselves.
That's how it was before and that's how it is now. Short supply and rampant demand fueled by a glut of employed capital fed their own infectious greed to capitalize any which way they could. They literally made stuff up, bundled mortgages and sold them knowing they had little value. Just like today's over supply and lack of demand fueled by a shortage of employed capital feeds their resistance to capitalize any which way they can. They won't. They are not budging today. Their level of risk has changed - arm twisting Federal government or not.
But they now say we need to knock down regulations to spread the prosperity. It's always been such a phony argument from the beginning.
Let's put into words everyone can understand. The CRA, Democrats, Fannie and Freddie did not cause the mortgage meltdown that led to the near financial collapse of the capital markets. A rigged system of capitalism fostering the infectious greed on Wall Street caused it. To claim anything else is an outright lie.
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