Bill Clinton Was Responsible For Mortgage Crisis That Led To Great Recession

While Elizabeth “Pocahontas” Warren criticizes Donald Trump for saying he can make money in a down recession – and Trump points out that Sen. Warren is known to do a little bad-market betting of her own – it’s important to understand how the Great Recession even began – and it might not be what you think.

Back in the late 1990s – yes, under Bill Clinton – the feds were pushing mortgage lenders – specifically Fannie Mae – to lower the credit requirements so more minorities and low-income Americans could sell houses. The New York Timesreported on this in 1999:

Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.

Even back then, there were skeptics. Specifically, the American Enterprise Institute raised alarms, saying if all these “low-income” mortgages fail, there would be a crisis.

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

And Mr. Wallison was right. When these bad mortgages were packaged and repackaged by Wall Street and sold as good investments, it all came apart when people began to default on their loans.

That’s the history and that’s how it all started.

http://www.thefederalistpapers.org/...r-mortgage-crisis-that-led-to-great-recession