The Roots of the Financial Crisis

In the New York Post, Stanley Kurtz looks for the origins of the current financial crisis and finds them in the activities of ACORN, and Barack Obama, dating back to the mid-1990s:

FOR years, ACORN had combined manipulation of the CRA with intimidation-protest tactics to force banks to lower credit standards. Its crusade, with help from Democrats in Congress, to push these high-risk “subprime” loans on banks is at the root of today’s economic meltdown. …

As ACORN ran its campaigns against local banks, it quickly hit a roadblock. Banks would tell ACORN they could afford to reduce their credit standards by only a little – since Fannie Mae and Freddie Mac, the federal mortgage giants, refused to buy up those risky loans for sale on the “secondary market.”

That is, the CRA wasn’t enough. Unless Fannie and Freddie were willing to relax their credit standards as well, local banks would never make home loans to customers with bad credit histories or with too little money for a downpayment.

So ACORN’s Democratic friends in Congress moved to force Fannie Mae and Freddie Mac to dispense with normal credit standards. Throughout the early ’90s, they imposed ever-increasing subprime-lending quotas on Fannie and Freddie.

But then the Republicans won control of Congress – and Rep. Roukema scheduled her hearing. ACORN went into action to protect its golden goose. …

ACORN’s intimidation tactics, and its alliance with Democrats in Congress, triumphed. Despite their 1994 takeover of Congress, Republicans’ attempts to pare back the CRA were stymied.

Instead, Democrats like Rep. Barney Frank (D-Mass.) and Reps. Kennedy and Waters allied with the Clinton administration to broaden the acceptability of risky subprime loans throughout the financial system, thus precipitating our current crisis. …

WHEN the ACORN-Democrat alliance finally succeeded in blocking Republicans from restoring fiscal sanity in 1995, the way was open to virtually unlimited lending quotas – and to a whole new way of thinking about credit standards.

Urged on by ACORN, congressional Democrats and the Clinton administration helped push tolerance for high-risk loans through every sector of the banking system – far beyond the sort of banks originally subject to the CRA.

So it was the efforts of ACORN and its Democratic allies that first spread the subprime virus from the CRA to Fannie and Freddie and thence to the entire financial system.

Soon, Democratic politicians and regulators actually began to take pride in lowered credit standards as a sign of “fairness” – and the contagion spread.

And when financial institutions across the board saw that they could make money by trading what would once have been considered junk loans, the profit motive kicked in. But the bad seed that started it all was ACORN.

HOW does Barack Obama fit into all of this? Obama has been a key ally of Chicago ACORN going back to his days as a community organizer.

Read it all. One of the common themes of modern American history is that liberals will create a problem by ill-advised government action, then benefit from it politically by proposing ever more intrusive government action to solve it. That appears to be happening again in connection with today’s credit crisis.

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