Obama: Let’s Start a New Financial Crisis

File this under “Unbelievable.” We now learn from the Washington Post that the Obama administration, in its relentless quest for “social justice,” is pushing banks to make more loans to people with weak credit ratings. It seems that Obama and his “economic advisers” have concluded that the current “housing rebound” is “leaving too many people behind”—most notably, undercapitalized first-time homebuyers and nonwhite minorities with low credit scores. To remedy this putative disaster, the administration wants banks to rely less on the time-tested, race-neutral lending criteria that have served as reliable barometers of credit-worthiness since time immemorial—income, net worth, credit history, etc.  Instead, banks should “use more subjective judgment in determining whether to offer a loan” because, as Obama’s Federal Housing Administration (FHA) commissioner puts it, “there are lots of creditworthy borrowers … all the way down the credit-score spectrum.” And hey, if this policy ultimately causes borrowers to default on their loans, that’s no big deal. “Taxpayer-backed programs”—including those offered by the FHA—will magnanimously pick up the tab.

No, you aren’t in a time warp. This article wasn’t written ten years ago, before the housing-market crisis plunged the American economy into the proverbial sewer. Difficult as it may be to believe, the current president of the United States is actually prescribing precisely the same practice—government policies pressuring banks to lend money to unqualified applicants—that caused the crisis in the first place.

Let that sink in for a moment.

These types of government policies initially emerged the mid-1970s, when “progressive” Democrats in Congress began a campaign to help low-income minorities become homeowners. This led to the passage, in 1977, of the Community Reinvestment Act (CRA), a mandate for banks to make special efforts to seek out and lend to borrowers of meager means. Founded on the premise that government intervention is necessary to counteract the fundamentally racist and inequitable nature of American society and the free market, the CRA was eventually transformed from an outreach effort into a strict quota system by the Clinton administration. Under the new arrangement, if a bank failed to meet its quota for loans to low-income minorities, it ran the risk of getting a low CRA rating from the FDIC. This, in turn, could derail the bank’s efforts to expand, relocate, merge, etc.  From a practical standpoint, then, banks had no recourse but to drastically lower their standards on down-payments and underwriting, and to approve many loans even to borrowers with weak credit credentials. As Hoover Institution Fellow Thomas Sowell explains, this led to “skyrocketing rates of mortgage delinquencies and defaults,” and the rest is history.

The CRA was by no means the only mechanism designed by government to impose lending quotas on financial institutions. For instance, the Department of Housing and Urban Development (HUD) developed rules encouraging lenders to dramatically hike their loan-approval rates for minority applicants and began bringing legal actions against mortgage bankers who failed to do so, regardless of the reason. This, too, caused lenders to lower their down-payment and income requirements.

Moreover, HUD pressured the government-sponsored enterprises Fannie Mae and Freddie Mac, the two largest sources of housing finance in the United States, to earmark a steeply rising number of their own loans for low-income borrowers. Many of these were subprime mortgages—loans characterized by higher interest rates and less favorable terms in order to compensate lenders for the high credit risk they were incurring.

Additional pressure toward this end was applied by community organizations like the pro-socialist ACORN. By accusing banks—however frivolously or unjustly—of having engaged in racially discriminatory lending practices that violated the mandates of the CRA, these groups commonly sued banks to prevent them from expanding or merging as they wished. Barack Obama, ACORN’s staunch ally, was strongly in favor of this practice. Indeed, in a 1994 class-action lawsuit against Citibank, Obama represented ACORN in demanding more favorable terms for subprime homebuyer mortgages. After four years of being dragged through the mud, a beleaguered Citibank—anxious to put an end to the incessant smears (charging racism) that Obama and his fellow litigators were hurling in its direction (to say nothing of its mounting legal bills)—agreed to settle the case.

Forbes magazine puts it bluntly: “Obama has been a staunch supporter of the CRA throughout his public life.” In other words, he has long advocated the very policies that already have reduced the real-estate market to rubble. And now he is actively pushing those very same practices again. The reason for this is not difficult to comprehend: The president of the United States is a socialist ideologue who reveres big-government interventionism and deplores the free market. For good measure, he also happens to be an economic illiterate who, in his pontifications about fiscal matters, has all the credibility of a pre-Copernican stargazer explaining precisely how the sun revolves around the earth.

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  • truebearing

    Too many people give Clinton credit for "ending welfare" — welfare being the primary mechanism for bankrupting America in the Cloward-Piven scheme for Marxist revolution. What Clinton did at the end of his last term by making the CRA a quota system made welfare look affordable, and gave neo-communists like Obama a potent mechanism that could destroy any economy. Naturally Obama wants to do it again. Apparently Americans were too resilient, so he needs another shot at destroying the economy.

    By proposing this, Obama is irrefutably proving the allegation that he is intentionally destroying the economy. Even the Republican Party should be able to damage his mid-term hopes with this latest blatant race based redistribution scheme.

    Obama is brazenly displaying his racial animus toward whites, and his intention of federally imposing strong armed robbery on those who pay taxes for the benefit of minorites — rewarding his constituents, once again.. It gets clearer and clearer that Obama's Marxist utopia is for minorities only.

  • Jeff

    Its not "unbelievable", its totally predictable.
    Total destruction to pave the way for a new world order Good ole Barry's a COMMUN-ARCHIST except Obama walks like a duck but quacks like a chicken. Hannity calls him out half-way.

    • C.R.


  • jacob

    Brilliant Obama strategy. Achieve "social justice" and then shake down banks for billions for "predatory lending." It worked before. Why not try again?

    • stevef

      Correct….What's always left out is the racial hate motivating the Obama team. Obama's Fascism lies between the National Socialists and the Italian Fascists, both of the last century, in regards to the level of racial hate. As David H. once wrote, Hating Whitey is a crucial element of the American Left…..and not a word about this from the GOP or the primary Conservative spokespeople.

    • Looking4Sanity

      The only problem is that the average working American is getting pooch screwed at both ends by all of this. Banks and government have one thing in common…they both live off of other people's money. It's small consolation to us that they "fight" each other. Let's not lose sight of the fact that it was the government that ALLOWED the privately owned "Federal Reserve" to form and take control of our printing presses in the first place.

  • http://www.adinakutnicki.com AdinaK

    Of course, leftist "progress" is regressive and repressive, hence its usage.

    The moral decline of America has been in the making for decades. However, the current crop, under Obama's "proverbial wings", are making sure to finish off America – http://adinakutnicki.com/2013/01/22/the-moral-dec

    Who are his helpers/surrogates? Glean within, as to those who are BRINGING DOWN America – http://www.americanthinker.com/2013/04/bringing_d

    Adina Kutnicki, Israel http://adinakutnicki.com/about/

  • Michael Copeland

    Low information president

    • davarino

      No, he's got the info. Thats what makes him so dangerous. Its the low info voter we need to inform.

      • Dennis

        YES! The Low-info voters are getting everyone caught in the financial / economic avalanche to be feared. So, please avail yourself, for your continuing education as I did yesterday by watching and listening, and advise the Low-info voters of the following factors to be considered in this Youtube:

        As a result, I now own "THE GREAT DEFORMATION" and will continue to re-arrange financial matters to hopefully avoid the most serious possibilities steamrolling towards all of us.

  • xios

    Clinton did not end welfare. He fought the legislation, reluctantly signed it, and then shamelessly assured any leftist who complained that he would gut it as soon as he "had the votes". Then, when it worked, he took credit, like a good political whore…

  • Looking4Sanity

    In addition to destroying the economy, he has single-handedly set race relations back 80 years. There's a special place for people like him…and it AIN'T the White House.

    • 4_Constitution

      Morning. It looks like Obama is going to push banks to lend to all the newly minted Democrats who are crossing our southern border. I also heard he's letting Muslims take out loans they can't afford.

      I couldn't get on the growl at all today. Oh well. I see serf went back and kissed Suzie's butt. LOL….how desperate does one have to be to do that?

      • Looking4Sanity

        "….how desperate does one have to be to do that? "

        I guess you and I will never know those depths of desperation. Live free or die. I refuse to be censored, although I can see the need for social decorum. I see that WeeWeinie is posting there too. Their debasement is complete.

        And, as to my original comment…that "special place" he belongs? No air conditioning.

    • Mary Sue

      Yeah, not to mention, it gives the racists who wouldn't elect a black man EVER, some semblance of legitimacy when they can point to Obummer and say, "See! See! Told you a black man being president would be a freaking disaster!" He'll have singlehandedly ruined it for any other black person.

      Only, it's not really the fact that he's black. It's the fact that he's a freaking COMMUNIST.

      • Looking4Sanity

        You're absolutely right, Mary Sue…on both points. We keep looking for answers. I wonder if it has occurred to anyone yet that the answer is: there IS no earthly answer to these problems we face.

  • kasandra

    Cloward and Piven advocated collapsing the economy as the path to usher in Socialism in the U.S. They wanted to do it by overloading the welfare system. Well, that hasn't worked because with nearly 50 million on food stamps and nearly 9 million on Social Security Disability the economy, although groaning, still hasn't fulfilled their expectations. But a second housing/banking crisis just might do the trick. So that's is what their acolyte pursues. It's not that he doesn't know what will inexorably happen. He knows. It's what he wants to happen. To me, this is the only conclusion that can legitimately be drawn.

    • guest

      With the name like Kasandra… I suspect we have a twofer on our hands; in one swoop internally in the country, we end up with Great Social Equalization and externally, with pretty much open borders, we bring the country few notches down to the level of the "average" rest of the world. Get a Democrat in the WH in 2016 and throw away the key on the way out. C-P is exceedingly powerful strategy and is unfolding in front of our very eyes.

  • Gamaliel

    Outrageously these policies will get him more vote because when you guarantee loans you create a temporary surge in the housing market. Then in two years he'll have a Democratic house and Senate and then when the economy collapses it won't matter.

    • objectivefactsmatter

      "Outrageously these policies will get him more vote because when you guarantee loans you create a temporary surge in the housing market. Then in two years he'll have a Democratic house and Senate and then when the economy collapses it won't matter."

      There is that danger but if we keep screaming and trying to teach people, pressuring our supposed representatives about this we can at least slow it down enough and make it an issue for mid-terms before he manipulates the results.

      And it might backfire because now the loans will be clearly toxic from the start. No nut shell games to hide that.

      • WilliamJamesWard

        People may get to the point of sitting back and watching the destructive results with
        contempt but by then the problems will be much worse, the lethargy grows and
        ambivilance shows in attitudes of "I'm OK, let everyone else fend for themselves",
        We will all suffer, 2014 is all important, Obama must be stopped…………………….William

  • Jon Cohen

    The age of reversed racism came. It is real and it is here. We made in our hands, because we vote for it
    Because we left our values, religion and forgot who we are. Now, the results of our wickedness is a followings, believe or not:
    This country is over taken my the new people from foreign countries.
    our women will seek marriage to foreign man because our men became something not a male or female "gays"
    We are subject and target for evil of racism, which we have eliminated from our land. Now, came back
    reversed to enslaving the working to people and made not productive people as their masters.
    Our influenze in the world as super power in decling because we have leaders who are pro-enemy
    such John Kerry and Hillary Clinton.
    America !!!! What we get is what we chose and vote for it.

  • Ben Jabo

    Obama is a Carbon Copy of Alinsky

  • Donald DaCosta

    From 2007 to 2011 Chris Dodd and Barney Frank were chairmen of the Senate Banking Committee (United States Senate Committee on Banking, Housing, and Urban Affairs) and the House Financial Services Committee (the House Banking Committee), respectively. These guys were on the scene in positions of influence over the banking industry when the housing crisis precipitated the recession that began in 2008. They and others had, only months before, declared that there was no looming housing crisis, that Fannie Mae and Freddie Mac were sound financial institutions, there was no suspicious financial activity going on and no further regulation was required. Watch this video. It's political but relevant to Dodd and Frank's involvement in the crisis that Obama wants to inflict again on what he firmly believes are the ignorant, clueless citizenry that elected him for a second term. Who can blame him.

    He and his democratic machine then appointed these two guys to step in and solve the “crisis,” implying of course that it was the republicans, specifically Obama's favorite republican villain, George W. Bush, that caused it. And so we have the Dodd Frank Consumer Protection Act authored by these two “champions of ethical conduct,” Chris Dodd and Barney Frank. Obama put the foxes in charge of repairing the broken chicken coup.

    That Obama wants to repeat the debacle of 2008 proves at least one of two equally damaging points of view. Either he is clueless about what is widely recognized was the root cause of the “disaster he inherited from the policies of the eight years previous to 08” or he intentionally seeks a repeat to finally drive a stake into the heart of the country he hates.

    He must be stopped. The Republicans have a golden opportunity here to expose the true nature of this President. Will they finally get a grip and hit him with both barrels or will we be subject to more pap about “respecting the office” and he is, after all, the President and thus immune from objective criticism, a more cowardly but typical response to every outrage this President commits.

  • The Obama Timeline

    "..the current 'housing rebound' is 'leaving too many people behind.' First, it's not much of a rebound, but those who are being "left behind" should be left behind. A person who earns $25K should not buy a house that costs $300K with no money down.

    John Taylor, president of the National Community Reinvestment Coalition, complains about reality: “It is very difficult for people of low and moderate incomes to refinance or buy homes.” It is also difficult for janitors to perform successful brain surgery, for bank tellers to earn more than bank presidents, and for someone who is morbidly obese to win the Boston Marathon. So what?

    • objectivefactsmatter

      "..the current 'housing rebound' is 'leaving too many people behind.' First, it's not much of a rebound, but those who are being "left behind" should be left behind. "

      He makes it sound like "left behind" is violating due process of justice or some inalienable rights. That's what you get when anything you feel you need becomes a "right" when you get the mob to agree with you.

      That's what we get as a nation (I wasn't born yet) from failing to support Joe McCarthy in the long game against communist traitors and their dupes.

  • margaret388

    if you care to investigate, you will find out that all communist regimes must always create a crisis. part of this is to have the public frighten, or worried, or concerned, or in panic. that way, the public will not have the time to go on with their business in peace. they will keep the citizens afraid of something and that something, of course, will be blamed on the republicans, or the libertarians, or the tea party but never is the fault of the regime, never. Yes they are tricky but, if you inform yourself at least you will know where they are coming from.

  • Len_Powder

    As Jesus said to the Father on the cross: "They know not what they do." This will be the Obama Administration's epithet once the smoke has cleared from the destruction and ruin it will wreak on the nation.

  • objectivefactsmatter

    “there are lots of creditworthy borrowers … all the way down the credit-score spectrum.”

    Uh, OK. Sure. No problems here.

    • mjazzguitar

      "There's a lot of nice people in this country- all the way down to the prisons as far as solitary confinement."
      Do words mean anything at all to people anymore?

      • objectivefactsmatter

        "Do words mean anything at all to people anymore?"

        Not in any fixed sense. Words mean what people want them to mean, they hope.

  • Edward Koestner

    I think they know exactly what they are doing.

    The crumbling of the “American way of life” does not necessarily mean the end of America. We must pray, work and trust in God that from the debris of our crumbling society, a new America will arise — an America of faith and family, service and honor.

    It all hinges on how we confront the coming economic collapse.

    This collapse may come suddenly, or in stages, like the steps of a staircase. In either case, we need to get ready. Here are 10 Steps that will help you and your family prepare.

  • WilliamJamesWard

    There is no new financial crisis, there is only the ongoing attack by Obama on American
    finance and his ruination of everything that supports stability of America as a Nation. All
    that he does is for the purpose of weakening America for takeover of Communist, Socialist,
    Liberal and Islamist forces. At this time he is continuing his campaigning mode in order to
    tweak the 2014 elections into a totality of Democrat control to rewrite our Constitution and
    every law that in any way supports Constitutional government, equitable laws, criminal
    prosecution, sovereighnty and freedom our prosperity is built on. Opposition must be made
    at every level and American Patriots must act or witness our demise. …………..William

  • http://twitter.com/quillerm @quillerm

    Here we go again. Democrat politicians force banks to give mortgage loans to the poor and minorities or face charges of 'Racist' lending practices. This is exactly what caused the Great Bank Crash of 2007, that democrats blamed on Banks and Republicans. If only low information Americans would check the facts and not rely on our leftist media democrats wouldn't get away with destroying our economy.

  • http://twitter.com/quillerm @quillerm

    In the Obama Economy College Graduates are lining up for jobs at fast food outlets. How will they ever afford a mortgage at $10 a hour?

    • mjazzguitar

      Hey, no problem- the communists will just raise the minimum wage to $20 an hour.

      • Leslie Satenstein

        Minimum wage in other countries is at 11/hr. And that includes Restaurents, where the minimum wage was $4.00.

    • Leslie Satenstein

      Read my comment. If the banks do not give these graduates a chance to start businesses, they will be stuck in their low paying jobs. Credit unions were the way in other countries to get small businesses going. The banks were saved by Obama and his funneling money to them in times of need. Now the banks have to not stop individuals with over 50k and under a 100k per year income from getting low interest loans

      • objectivefactsmatter

        "If the banks do not give these graduates a chance to start businesses, they will be stuck in their low paying jobs."

        Which graduates? The ones the banks can't trust based on financials? Who then takes that risk? Taxpayers?

        Nobody is "stuck" with a low paying job until leftists tell them so.

        "Credit unions were the way in other countries to get small businesses going."

        What does that have to do with racial quotas for loans?

        "The banks were saved by Obama and his funneling money to them in times of need."

        Next time just transfer it straight to the EBT cards if that is your plan to "funnel money" from the fed to shore up the economy. Or just let people fail until they find out their true talents that don't require deception and whining.

        Loans have always been scaled based on ability to repay. By "scaled" I mean structure, everything from how much is loaned to how long the borrower has to pay it back. Ability to pay is based on historical income, track record with debt payment and plausibility that the funding might help them put together a valuable business that creates or enhances their ability to repay.

        Therefore if you fool with this you lower the bar for performance. You can't get around that. Why will people need to worry about repayment when the fed will guarantee their next loan too? Why do they need to stress their brains over the numerous great and little details of business success when the risk is taken on by the whole nation collectively?

        Do you even understand the nature of my questions?

  • Leslie Satenstein

    Bravo Obama.

    You are truly doing the right thing. I agree and lets analyze what you are asking.
    You are asking the banks to do normal due-diligence and where there is a small business, a need for small personal loans, etc., give consideration. You did not ask for it to be a "follow the law", but rather, do make loans to businesses that show a pro-format business plan, with a 3 year horizon, to determine if the loan is within the means of the business or individual to repay, and to help kickstart the economy.

    Big corps cant do it, because they have all the wealth, and they only look to off-shoring the labor and the best of the value added. Big corps have impoverished the average citizen. The average citizen needs help to start businesses, to develop products and services, and to hire workers.

    Please tell me whats wrong with that?

    • objectivefactsmatter

      "Bravo Obama. You are truly doing the right thing. I agree and lets analyze what you are asking."

      Well, you are a communist. You're a collectivist with regard to federal management of taxes used to create opportunities for people who have not yet earned them.

      "Big corps cant do it, because they have all the wealth, and they only look to off-shoring the labor and the best of the value added. Big corps have impoverished the average citizen. The average citizen needs help to start businesses, to develop products and services, and to hire workers."

      Big corps are big because they put together successful business plans. That's what successful people do. Corporations are simply groups of people who agree to operate businesses together.

      You're still a communist and why do I smell Chomsky?

  • Michael

    Mr. Obama instead of asking the banks to be more liberal with their money maybe you should give up some of your golf games and vacations and give the money to people that deserve it to buy homes. You are so good with other people's money. I guess you just don't ever learn from your mistakes of the past.

    • objectivefactsmatter

      "Mr. Obama instead of asking the banks to be more liberal with their money maybe you should give up some of your golf games and vacations and give the money to people that deserve it to buy homes. "

      He's the perfect role model for all other stealth jihadi communist leaders.

      • WilliamJamesWard

        It is obvious Obama is not learning from his mistakes as he intended to do what he
        did for the rotten results and will continue on in this vein until we fall into total
        disrepair or he is thrown out by the people…………………….William

  • Ziad K Abdelnour

    The Los Angeles Times likewise spoke of, “…the increased power of the
    complex and mysterious Fed” in October 2009. Despite, “…more than
    two-thirds of the House of Representatives” lending their legislative
    support to, “…a bill that would subject the central bank to increased
    congressional oversight through expanded audits”, Bernanke was
    intransigent in defending the, “…major new role” he and the Obama
    Administration had in mind for the Fed – specifically, “…supervising
    large financial institutions that pose a risk to the entire economy.”
    Such a role means the Fed would cease being merely an entity concerned
    with setting interest rates and become, essentially, an all-purpose
    financial regulatory agency.
    Ziad K Abdelnour