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Are the Clintons the Real Housing Crash Villains?
By Lawrence Kudlow and Stephen Moore
We are going to reveal the grand secret to getting rich by investing. It’s a simple formula that has worked for Warren Buffett, Carl Icahn, and all the greatest investment gurus over the years. Ready? Buy low, sell high.
It turns out that Donald Trump has been very, very good at buying low and selling high, and it helps account for his amazing business success.
But now Hillary Clinton seems to think it’s a crime. Campaigning in California last week she wailed that Trump “actually said he was hoping for the crash that caused hard working families in California and across America to lose their homes, all because he thought he could take advantage of it to make some money for himself.” She’s assailing Trump for being a good businessman — something she would know almost nothing about because she’s never actually run a business, though she did miraculously turn $1,000 into $1 million in the cattle futures market many years ago.
Hillary’s new TV ads say that Trump predicted the real estate crash in 2006 (good call) and then bought real estate at low prices when the housing crash came in 2008 that few others foresaw. Many builders went out of business during the crash, but Trump read the market perfectly.
What is so hypocritical about the Clinton attacks is that it wasn’t Trump, but Hillary, her husband, and many of her biggest supporters who were the real culprits here.
Before Hillary is able to rewrite this history, let’s look at the many ways the Clintons and cronies contributed to the Great Recession.
The seeds of the mortgage meltdown were planted during Bill Clinton’s presidency.
Under Clinton’s HUD secretary Andrew Cuomo, Community Reinvestment Act regulators gave banks higher ratings for home loans made in “credit-deprived” areas. Banks were effectively rewarded for throwing out sound underwriting standards and writing loans to those who were at high risk of defaulting. If banks didn’t comply with these rules, regulators reined in their ability to expand lending and deposits.
These new HUD rules lowered down payments from the traditional 20% to 3% by 1995 and zero down payments by 2000. What’s more, in the Clinton push to issue home loans to lower income borrowers, Fannie and Freddie made a common practice to virtually end credit documentation, low credit scores were disregarded, and income and job history was also thrown aside. The phrase “subprime” became commonplace. What an understatement.
Next the Clinton administration’s rules ordered the taxpayer-backed Fannie Mae and Freddie Mac to expand their quotas of risky loans from 30% of portfolio to 50% as part of a big push to expand home ownership. Fannie and Freddie were securitizing these home loans and offering 100 percent taxpayer guarantees of repayment. So now taxpayers were on the hook for these risky, low down payment loans.
Tragically, when prices fell, lower income folks who really could not afford these mortgages under normal credit standards, suffered massive foreclosures and personal bankruptcies. So many will never get credit again. It’s a perfect example of liberals using government allegedly to help the poor, but the ultimate consequences were disastrous for them.
Additionally, ultra-easy money from the Fed also played a key role. Rates were held too low for too long in 2002-2005, which created asset price bubbles in housing, commodities, gold, oil, and elsewhere. When the Fed finally tightened, prices collapsed. So did mortgage collateral (homes) and mortgage bonds that depended on the collateral. Many bond packages were written to please Fannie and Freddie, based on the fantastical idea that home prices would never fall. Fannie and Freddie, by the way, cost the taxpayers $187 billion.
Just to make this story worse, Senator Hillary Clinton and Senator Barack Obama voted to filibuster a Republican effort to roll back Fannie and Freddie. But on top of all this, while Hillary was propping up Fannie and Freddie, she was taking contributions from their foundations. Here is how a Washington Times investigative report concluded:
Freddie Mac and Fannie Mae’s political action committee and individuals linked to the companies donated $75,500 to Mrs. Clinton’s senatorial campaign. And on top of that, the embattled Clinton Foundation received a $50,000 contribution from Freddie Mac, according to the Times.
To be clear, there was plenty of blame to go around among both political parties and the horde of housing lobbyists who helped set up this real estate house of cards. It’s a sordid story with plenty of blame all around. And the Fannie/Freddie story is still not solved. It now includes profit sweeping from shareholders to the government, thereby ending any chance to sell the mortgage agencies back to the private sector.
Meanwhile, Hillary’s attempt to blame Donald trump is utterly absurd. Buying low and selling high is not against the law. In fact, Mr. Trump’s investment acumen may serve America well in the not too distant future.
Stephen Moore is chief economist at the Heritage Foundation.
Published in Economics
No mention of Franklin Raines, or of the delightfully ubiquitous Jamie Gorelick? The Clinton cronies who made more than $25 million each running Fannie Mae into the ground? Gorelick, of course, was also the official of the Clinton Administration who prohibited sharing of information between criminal investigators and intelligence agencies, which AG John Ashcroft testified was a “structural cause” of the 9/11 attacks. Such wonderful people the Clintons surround themselves with.
What amazes me is the way politicians and the media have been able to air-brush out the government’s role in the debacle and shift all blame to Wall Street. The bottom line is that if the mortgages on which Wall Street’s derivatives had been sound, the derivatives would not have collapsed. Unfortunately, the federal government went out of its way to ensure that they weren’t.
I have quite a bit of trouble feeling sorry for those subprime borrowers who “lost their homes” and went bankrupt. Many people were allowed to not only “buy” homes way above their financial wherewithal, but they also folded credit card debt into those mortgages. They really lost nothing, as they had zero skin in the game. In the meantime who ended up paying for this disaster? It was the folks who lived prudently, paid their mortgages and other debts, and even managed to save a few bucks in a 401K, which, as a result of the fiasco, lost 50% of its value. Yes there is much blame to go around and leave it to Clinton and her fellow Dems to turn the truth on its head. Donald Trump wasn’t even in the mortgage banking business, he was a borrower himself, albeit not a subprime one. Hillary Clinton is a supreme liar.
Wouldn’t the acknowledgement of these facts ultimately put the blame on the public?
For taking the loans out I mean?
Wasnt all this mess just done for the sake of symbolism and good feels?
If the public is actually forced to examine the functional and psychological causes of the boom/bust I think politics will be forever changed, invariably pushing out many established politicians.
Is doing this even possible?
Has it ever been attempted?
The point is well taken, but the counter example of Mrs. Clinton and the cattle futures market is over stated. I cannot remember the details, but my recollection is that Mrs. Clinton, with the able assistance of the Wall Street Journal and some broker (something like Stephens as I recall) turned either $1,000.00 or $10,000.00 into $100,000.00, not $1,000,000.00.
Of course, the Wall Street Journal had nothing to do with it, but it is Mrs. Clinton’s only endorsement of what the WSJ has to say.
I hate to pettifog, but small errors are the gunpowder that the left uses to discredit the entirely accurate main point.
I have a family member who bought a house in Las Vegas (but didn’t live there) so he could rent it out–against HUD subprime rules. After the bust he sold it to a short-seller, but blames it all on the dirty bankers. The government, in his mind, is completely innocent. This is what socialism does.
I’m sorry, has this been done? My take is that anyone who is interested in this and capable of understanding, knows that the government is the cause. And the same goes for knowing that the government is responsible for the outrageous costs of post-secondary education. There may be something here for healthcare costs as well. Those who don’t know that the government causes these maladies, don’t care. So, politicians and the media know the truth but tell a different story. This is the established pattern.
Don’t forget Sid “Vicious” Blumenthal, who as far as I know is still working for her, and the late Sandy Berger, with his magic undershorts and socks.
A million or a mere $100,000. At this point what difference does it make?
Here’s an idea: Let’s take an issue for which the Clinton government had a main role in causing damage to the economy and to the people it purported to help. It could cause Democrats to be thrown out of office, so let’s blow it to pieces and make it a non-issue by blaming the people for being irresponsible in accepting the help. Think of it as SuperSquirrel.
From The American Spectator:
“With wanton disregard for the economic well being of America, a decade ago the social justice entrepreneurs of the ultra-leftist Association of Community Organizations for Reform Now (ACORN) let Americans know their strategy for bringing equality of result to the housing market — at all costs.
In a circa 1999 document, “To Each Their Home: Success Stories from the ACORN Housing Corporation,” the ACORN affiliate called the American Dream a sham and bragged about undermining banks’ underwriting standards.
The brochure acknowledged there may be scattered “stories of hope and success” in ACORN-targeted communities, but “they also belie the supposition that if you simply work hard, sacrifice and save, you can easily buy a home of your own.” (The document is available here.)
ACORN Housing took credit for developing “several innovative strategies” to get around pesky traditional lending guidelines, which were unfair because they “were geared to middle class borrowers.”
Instead of using passé measures of creditworthiness such as, say, credit history and having an adequate income, ACORN convinced lenders to adopt “more flexible underwriting criteria that take into account the realities of lower income communities.” Henceforth, some banks serving inner cities would accept “less traditional income sources such as food stamps.” (See Foundation Watch, November 2008.)
http://spectator.org/42706_acorns-food-stamp-mortgages/
ACORN is not running for election. The Clintons are.
Rahm Emanuel was placed on the board of Fannie or Freddie (along with other Clinton cronies) and received at least one 6 million dollar bonus. That whole setup stinks.
Long before Clinton became president, you could buy a home for less than 20% down. In the late 1980s, we had the low-doc or no-doc mortgage. That’s when they gave you a mortgage without verifying anything on the application because they could securitize it immediately. Maybe you should blame Reagan for CMOs? Of course not.
I give you that the Clintons created the revolving door with Wall Street. I give you that they created moral hazard through the bailouts of Mexico and LTCM. I give you that they loosened Glass-Steagall. All of these things contributed to the crisis. But you could blame Greenspan just as much.
How Rahm with no prior finance experience came to Wall Street and left with millions just a few years later is one of the great uninvestigated stories of the 1990s-2000s.
We can’t repeat these truths often enough. We should hammer them because they are truths. Then we let the same crooks, Frank and Dodd, write the new law. I’m sure there is more to this. How much slum housing was dumped onto folks who never were going to pay? How much did these slum lords press for sub prime lending putting real mob pressure on banks? Has anyone looked into this? I heard hints at the time, then nothing.
Don’t look now, but they are at it again. The “Home Ready” program was just launched by FNMA to better serve low income but creditworthy borrowers. Yeah. Right. “Home Ready” aka FNMA bending over backwards to make stupid loans to people we shouldn’t lend to but are going to anyway.
You can google for all the sorid details. Insert quote from George Santayana here.