The past is prologue?

If some of our more partisan conservative commentators are to be believed, Bill Clinton and his administration are to blame for anything and everything that’s gone wrong in this country since 1992, including bin Laden, Katrina, the subprime mess, and of course the present worldwide economic crisis.

In the latter cases, the line of thought seems to be that the present crisis can be traced back to the Community Reinvestment Act, originally passed in 1977 and furthered during the Clinton administration. Here’s how it’s described on the Federal Reserve’s own web site:

The Community Reinvestment Act is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound operations. … The regulation was … most recently amended in August 2005.

The gist always seems to be that lending to minorities is what got us here, and that it is all the fault of the Clinton administration.

Just a couple of observations: First, you’ll note that the Community Reinvestment Act required banks to operate in a way “consistent with safe and sound operations.” And, second (and perhaps most significant), the Act was “most recently amended in August 2005.”

Daniel Gross, writing in the October 7, 2008 issue of Newsweek, summed it up best:

The Community Reinvestment Act applies to depository banks. But many of the institutions that spurred the massive growth of the subprime market weren't regulated banks. They were outfits such as Argent and American Home Mortgage, which were generally not regulated by the Federal Reserve or other entities that monitored compliance with CRA. These institutions worked hand in glove with Bear Stearns and Lehman Brothers, entities to which the CRA likewise didn't apply. … Nor did the CRA force the credit-rating agencies to slap high-grade ratings on subprime debt.

Though I believed from experience that there have been many, many foreclosures that weren’t necessarily related to subprime lending, the Gross article offered some detail, pointing out that, for example, a builder of high-end condominiums in Florida filed for bankruptcy just a couple of months ago:

Very few of the tens of thousands of now-surplus condominiums in Miami were conceived to be marketed to subprime borrowers, or minorities—unless you count rich Venezuelans and Colombians as minorities.

And it’s a myth that lending to poor folks or minorities is in itself risky. Gross cites a recent New York Times report that

... a long-running initiative to build homes and sell them to the working poor in subprime areas of New York's outer boroughs, has a repayment rate that lenders in Greenwich, Conn., would envy. In 27 years, there have been fewer than 10 defaults on the project's 3,900 homes. That's a rate of 0.25 percent.

The villains in the subprime lending debacle were in it for the money. The loan fees for such loans are higher than those for conventional loans, and I’ve seen for myself cases where the buyer who would have qualified for a conventional or FHA loan was pushed into a subprime loan because the loan officer was greedy. And, of course, there were loans made that should never have passed underwriting because the loan officer was simply dishonest.

Even so, if you want to blame it all on Clinton, what do you do about the fact that, when the Act was amended in 2005, the Presidency and both houses of Congress were under the complete control of Mr. Bush and the Republicans?

Hm.

I leave the reader to think about it while I point the finger in another, more sinister, direction.

Back in 1996, in what may have been a prescient letter to the New York Times, I wrote:

I believe now that Newt Gingrich, with the perhaps unwitting support of the famous “freshmen” he so carefully recruited, programmed and brought to Washington, does have it in his mind to dismantle if not destroy our federal government. I think it’s time for someone to openly question whether his intentions are honorable.

His unrelenting “Newtspeak” attacks on existing government programs, his vilification of anyone opposing him, his brazen moves to destabilize Wall Street, his cultivation of discord and fostering of anarchy, and finally his dismissal of public disagreement with comments that amount to ‘progress is painful, but I know what’s good for America,’ suggest that Americans had better pay attention when he calls it ‘revolution.’ Those who call him brilliant would do well to recall Hitler, for one, among those revolutionaries of history who used similar tactics to take control of the existing government. It is increasingly apparent that Gingrich’s agenda includes a revised constitution that he intends to write and a ‘revolutionary’ government that he intends to control.

Judging by the ineffectiveness of our scattered protests, he seems to have convinced the American people that we cannot stop the inevitable.

Every politician in Washington claims to care most about “middle class Americans.” Well, the working people of America — the true middle class — had better stand up for themselves, or suffer the consequences.

During the recent turmoil in Washington while Congress tried to decide what to do, it was reported on good authority (Andrea Mitchell) that ol’ Newt had been working furiously behind the scenes in opposition to the “bailout” legislation – before he came out in support of it. There was also mention of the possibility that he is preparing a run for President in 2012.

Another something to think about.