In the beginning:
The 30’s: Redlining - The practice of not giving loans or extending credit to bad areas.
The 70’s: Community Reinvestment Act - A 1977 act that was altered several times.
- According to a United States Department of the Treasury study of lending trends in 305 U.S. cities between 1993 and 1998 467 billion dollars in mortgage credit flowed from CRA-covered lenders to CRA-eligible borrowers. The number of CRA mortgage loans increased by 39 percent. Other loans increased by only 17 percent.
The 80’s: Garn-St. Germain Depository Institutions Act of 1982 - Sponsored by Fernand Joseph St. Germain(D), Chuck Schumer(D), Steny Hoyer(D) and Jake Garn(R).
This act gave us ARMs.(Adjustable Rate Mortgages) Now they say “teaser-mortgage” or “teaser loan.” It’s an ARM, period.
This Act is also alledged to have led the way for the Savings and Loan Crisis (S&Ls were deregulated during Jimmy Carter’s administration)
The 90’s (almost) : Financial Institutions Reform Recovery and Enforcement Act of 1989 (FIRREA) - An attempt at regulation as well as making Fannie Mae and Freddie Mac support more risky mortages. Critics maintain it aggravated the S&L crisis.
1993-95: President Clinton Orders new “regulations” which actually deregulated Fannie Mae and Freddie Mac. CRA mortgage loans increased by almost 40%. Furthermore, new rules went into effect on January 31, 1995, encouraged community groups (e.g. ACORN) to complain when banks were not loaning enough to specified neighborhood, income group, and race; allowing community groups that marketed loans to targeted groups to collect a fee from the banks. Also known as politically correct extortion, as these complaints would hurt the lenders CRA rating, put in place by FIRREA.
1999: Fannie Mae eases restrictions.
2002: The Sarbanes-Oxley Act of 2002: In response to the scandals from Enron, Tyco, Worldcom, etc., Paul Sarbanes(D) and Michael Oxley(R) delivered this Act to President George W. Bush who signed it into law. It is the heaviest regulation since The New Deal. It was passed by a Republican Congress. GSEs like Fannie Mae and Freddie Mac were not covered. President Bush propsed new regulationsto the GSEs. They were opposed by Democrats.
2004: Armando Falcon. Brought down Fannie Mae CEO Franklin Raines, who pocketed tens of millions of our tax dollars. The Democrat Party came out in force to defend their slush fund.
President Bush decided to join Democrats and started the “Ownership Society” talking point. It was good in principle, but he caved in on regulating the GSEs.
2005: S. 190 Federal Housing Enterprise Regulatory Reform Act of 2005: Sponsored by Chuck Hagel with co-sponsors John McCain, Elizabeth Dole and John Sununu, all Republicans. This was an attempt to regulate GSEs Fannie Mae and Freddie Mac. It was defeated by bi-patisan opposition.
2008: GSEs Fannie Mae and Freddie Mac who owned or guaranteed about half of the U.S.’s $12 trillion mortgage market, seized due to mismanagement. Insurance groups like AIG suffered and also began to collapse in the wake of bad financial news and uncertainty.
Countrywide Financial is exposed as a handmadien of the GSEs and offered sweetheart deals to Democratic Senators Chris Dodd and Barack Obama.
Bailout: Under the guise of “stabilizing the market” a massive bailout of 700 Billion dollars is proposed. The first version had 20%, roughly 141 Billion dollars going to ACORN. A revised version was defeated in the House by the Republican minority and 94 Democrats.
