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| − | ==Overview== | + | ==Myth== |
| − | [[category:claims]]A [[1999-09-30 Fannie Mae Eases Credit To Aid Mortgage Lending|1999 article]] in the ''[[New York Times]]'' (NYT) has been widely cited by Republican sympathizers as evidence that '''[[Bill Clinton]] helped cause the [[2008 mortgage crisis]]''', which was a contributing factor to the [[2008 financial meltdown]], and that therefore Clinton (and [[US Democratic Party|Democratic]] economic policy) bears responsibility for the mortgage crisis and the subsequent meltdown.
| + | Bill Clinton has frequently been accused of being complicit in the 2008 mortgage crisis – a major contributing factor to the 2008 financial meltdown – and that therefore Clinton (and Democratic economic policy) bears responsibility for both the mortgage crisis and subsequent [[Myths/Bill Clinton helped cause the 2008 financial meltdown|financial meltdown]]. |
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| − | The basic argument seems to be that Clinton put pressure on [[Fannie Mae]] and [[Freddie Mac]] (FM/FM) to expand mortgage loans among low and moderate income people, which led to an increased number of risky loans, thus increasing the number of eventual foreclosures – a problem which was at the heart of the 2008 mortgage crisis. | + | The basic argument seems to be that Clinton put pressure on Fannie Mae and Freddie Mac (FM/FM) to expand mortgage loans among low and moderate income people under the {{l/ip|Community Reinvestment Act}} (CRA), which led to an increased number of risky loans, thus increasing the number of eventual foreclosures – a problem which was at the heart of the 2008 mortgage crisis. |
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| − | A [[2008-09-23 Blame Fannie Mae and Congress For the Credit Mess|2008 article]] in the ''[[Wall Street Journal]]'' (WSJ) is frequently cited as supporting evidence, although it does not mention Clinton at all and assigns blame primarily to the Democrats for failing to support a 2005 [[US Senate Banking Committee|Senate Banking Committee]] reform bill, as well as some events in 2003-4 (FM/FM "accounting scandals") which might arguably have had their roots in events during the Clinton administration, but there doesn't seem to be any connection between those scandals and the claim that Clinton put pressure on FM/FM to accept more loans.
| + | This claim was especially popular during the closing weeks of the {{l/ip|2008 US presidential race}}, where criticism of Clinton (and his administration) was being used as criticism of [[Democratic Party]] policies and, by implication, of {{l/ip|Barack Obama}}. |
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| − | One of the authors of the WSJ article, [[Peter Wallison]] (a resident fellow at the [[American Enterprise Institute]]) is quoted in the 1999 article as warning that "If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry." In this, he seems to have been quite accurate, though in context it's not clear if he was talking about FM/FM specifically or subprime loans in general.
| + | Numerous examples of this claim are [[issuepedia:2008 mortgage crisis/Clinton/accusations|on Issuepedia]]. |
| − | | + | ==Reality== |
| − | A [[2008-09-25 Bill Clinton on economic crisis|2008-09-25 interview with Clinton]] on the Today Show has been interpreted as [[Bill Clinton admits blame for causing the mortgage crisis|Clinton admitting the blame as accused]].
| + | * '''First''': Congress passed the CRA in '''1977'''; Bush started weakening enforcement in '''2004'''. Which act do you think was more likely to have been the cause of a crisis in '''2008'''? |
| − | | + | * '''Second''': Republicans were aware of the developing housing bubble, and yet blocked any action to help reduce the effects of the crisis that would inevitably result when the bubble popped, including: |
| − | Citations were especially heavy during the closing weeks of the [[2008 US presidential race]], where criticism of Clinton (and his administration) was being used as criticism of [[US Democratic Party|Democratic]] policies and, by implication, of [[Barack Obama]].
| + | ** efforts to curb predatory lending |
| − | ==Links== | + | ** efforts to improve investigation of fraud in the banking industry |
| − | ===Citations===
| + | * '''Third''': Most of the housing loans that failed were ''not'' CRA loans, and CRA lenders engaged in less dangerous lending overall. |
| − | * '''2008-09-18''' [http://www.foxnews.com/story/0,2933,424945,00.html Analysis: Reckless Mortgages Brought Financial Market to Its Knees] ([[John R. Lott, Jr.]], [[FOX News]]): cites [http://econpapers.repec.org/article/oupecinqu/v_3A36_3Ay_3A1998_3Ai_3A1_3Ap_3A3-28.htm 1998 research] by [[University of Texas at Dallas]] economics professor [[Stan J. Liebowitz]] and fellow UTex prof [[Ted Day]] which argues that evidence of discrimination in lending is due to data irregularities and that "currently fashionable" lending practices intended to counter such discrimination "may have the unintended consequences of increasing defaults for the 'beneficiaries' of these policies". (Whether or not its argument holds up under examination, this seems to be a good piece of reporting worth further investigation and analysis. Lott, however, is a controversial character, and any assertions he makes should be checked carefully.) | + | ==Related== |
| − | * '''2008-09-19''' [http://www.wnd.com/index.php?fa=PAGE.view&pageId=75717 Guess again who's to blame for U.S. mortgage meltdown] ([[WorldNetDaily]]): cites an upcoming [[Housing America: Building out of a Crisis|book]] by [[University of Texas at Dallas]] economics professor [[Stan J. Liebowitz]], a [http://articles.latimes.com/1999/may/31/news/mn-42807 1999 LA Times article] praising the rise in minority home ownership, Lott's 9/18 FOX News op-ed, and the [[1999-09-30 Fannie Mae Eases Credit To Aid Mortgage Lending|1999 NYT]] article
| + | * Issuepedia: {{l/ip|2008 mortgage crisis/Clinton}}: more details and notes |
| − | ** '''2008-09-20''' [http://www.mail-archive.com/abc_politics_forum@googlegroups.com/msg21948.html discussion], with additional references
| + | * [[Myths/Bill Clinton helped cause the 2008 financial meltdown]] |
| − | * '''2008-09-21''' [http://www.sundriesshack.com/2008/09/21/the-roots-of-the-subprime-mortgage-mess-have-clinton-all-over-them/ The Roots of the Subprime Mortgage Mess Have Clinton All Over Them] (@[[The Sundry Shack]])
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| − | ** Appears to be an original observiation; its citations ([[2004-02-07 Subprime loan market grows despite troubles|2004 USA Today]], [http://clinton6.nara.gov/1993/12/1993-12-08-briefing-by-bentsen-and-rubin.text.html 1993 White House], [http://www.city-journal.org/html/10_1_the_trillion_dollar.html 2000 City Journal]) aren't found in any of the earlier pieces.
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| − | * '''2008-09-23'''
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| − | ** [[2008-09-23 Blame Fannie Mae and Congress For the Credit Mess]], ''[[Wall Street Journal]]'' op-ed by [[Charles W. Calomiris]] and [[Peter J. Wallison]]
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| − | *** does not mention Clinton, but rather assigns blame to some events in 2003-2005 for which they hold Democrats and [[Barack Obama]] partly responsible
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| − | *** also defends deregulation and claims that it is not responsible for the problem (so what was that 2005 reform bill supposed to do, if not improve regulation?)... just ignore those trillion$ of derivatives investments...
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| − | ** [http://mjperry.blogspot.com/2008/09/flashback-to-1999-origins-of-credit.html Flashback to 1999: Origins of the Credit Crisis] ([[CARPE DIEM blog]], [[Mark J. Perry]], University of Michigan): cites [[1999-09-30 Fannie Mae Eases Credit To Aid Mortgage Lending|1999 NYT]], [[2008-09-23 Blame Fannie Mae and Congress For the Credit Mess|2008 WSJ]]
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| − | *** [http://technorati.com/posts/iOTFHMGqyBXaolnO88WAW7J5dOcYwB7fiRhpKQSQ8%2Bw%3D Technorati]
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| − | ** [http://www.coyoteblog.com/coyote_blog/2008/09/im-sure-this-is.html I�m Sure This Is Not In Any Way Relevant To Recent Events] ([[Coyote Blog]]) cites Carpe Diem
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| − | ** [http://www.synthstuff.com/mt/archives/individual/2008/09/a_bit_on_fannie_may_from_the_new_york_times.html A bit on Fannie May from the New York Times] ([[Synthstuff]]) cites Carpe Diem
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| − | * '''2009-09-24''' [http://www.tuccille.com/blog/2008/09/yes-politicians-really-did-create.html Yes, politicians really did create the mortgage meltdown] ([[Disloyal Opposition]] blog by J.D. Tuccille) cites [[1999-09-30 Fannie Mae Eases Credit To Aid Mortgage Lending|1999 NYT]], Carpe Diem, Coyote Blog, and [[2008-09-23 Blame Fannie Mae and Congress For the Credit Mess|2008 WSJ]]
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| − | * '''2008-09-25'''
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| − | ** [[:File:2009-05-23 screenshot of cached blog entry now missing.crop.png|Wall Street Journal explains the bailout crisis]] (possibly retracted as of 2009-05-23), referring to [[2008-09-23 Blame Fannie Mae and Congress For the Credit Mess|2008 WSJ]] and Carpe Diem
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| − | ** [http://www.thecrimsonblog.com/the-subprime-mortgage-mess-and-the-folly-of-bailouts/ The Subprime Mortgage Mess and the Folly of Bailouts] ([[The Crimson Blog]]): main article, posted 2008-04-14, argues against bailouts for beneficiaries of subprime loans, but a comment on 09-25 gives the anti-Clinton argument in somewhat hysterical tones
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| − | * '''2008-09-30''' [http://www.mrswing.com/articles/Sergeant_Pepper_and_Housing.html Sergeant Pepper and Housing] ([[MrSwing]])
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| − | * '''2008-10-03''' [http://online.wsj.com/article_email/SB122298982558700341-lMyQjAxMDI4MjAyMzkwODM5Wj.html How Government Stoked the Mania]: again the WSJ... | |
| − | * '''2008-10-09''' [[youtube:ivmL-lXNy64|EVIDENCE FOUND!!! Clinton administration's "BANK AFFIRMATIVE ACTION" They forced banks to make BAD LOANS and ACORN and Obama's tie to all of it!!!]] (video): seems to be introducing additional evidence, but my audio isn't working at the moment
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| − | ===Rebuttals===
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| − | * '''2008-09-30''' [http://wonkroom.thinkprogress.org/2008/09/30/conservatives-cra/ Conservatives Try To Dodge Responsibility For Crisis By Blaming Poor People]
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| − | <blockquote>While most economists blame the current crisis on market failure and sparse
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| − | regulation, conservatives are attempting to elude responsibility by smearing
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| − | the victims of predatory lending. As [[Matt Yglesias]] points out, "it was
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| − | conservatives who watched as the housing bubble developed and it was
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| − | conservatives who blocked any action to try to ensure a soft landing once the
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| − | bubble popped".It was conservatives who blocked efforts to curb predatory | |
| − | lending and it was conservatives who blocked efforts to investigate fraud
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| − | more robustly.</blockquote>
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| − | Congress passed the [[Community Reinvestment Act]] in 1977; Bush started weakening
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| − | enforcement in 2004. Which act do you think was more likely to have been the
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| − | cause of a crisis in 2008?
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| − | | |
| − | But stop the presses -- this connection (blaming the 1977 CRA for the current
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| − | meltdown) was refuted back in *April*:
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| − | * '''2008-04-07''' [http://www.prospect.org/cs/articles?article=did_liberals_cause_the_subprime_crisis Did Liberals Cause the Sub-Prime Crisis?] | |
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| − | <blockquote>...it is hard to blame CRA for the mortgage meltdown when CRA doesn't even
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| − | apply to most of the loans that are behind it. As the University of
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| − | Michigan's Michael Barr points out, half of sub-prime loans came from those
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| − | mortgage companies beyond the reach of CRA. A further 25 to 30 percent came
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| − | from bank subsidiaries and affiliates, which come under CRA to varying
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| − | degrees but not as fully as banks themselves. (With affiliates, banks can
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| − | choose whether to count the loans.) Perhaps one in four sub-prime loans were
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| − | made by the institutions fully governed by CRA. .. Most important, the
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| − | lenders subject to CRA have engaged in less, not more, of the most dangerous | |
| − | lending.</blockquote> | |
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| − | The people pushing this meme are not interested in facts, however, knowing that a large chunk -- perhaps a majority -- of voters believe that "you can prove anything with facts".
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| − | ===Queries=== | |
| − | Where did the [[Community Reinvestment Act]] first get mentioned?
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| − | ===Earlier Analysis===
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| − | {{notice/need/update|Some of these questions have probably been answered by the rebuttals above; check and annotate.}} | |
| − | # What's not clear is why anyone thinks that this would cause a crisis 8 years later, rather than sooner. Also, why such a huge crisis, and so suddenly?
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| − | #* Has anyone done a survey of recent mortgage defaults to see if any significant percentage of them seem to be a result of the action described?
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| − | #* For that matter, has any kind of survey *at all* been done of those defaults, rather than blaming first and aiming later?
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| − | # How much of a role has the [[subprime mortgage crisis]] played in the current situation? My understanding is that the dollar volume involved in the derivatives market (especially [[credit default swap]]s) versus mortgages is somewhat as Lake Superior to a farm pond.
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| − | #* What about the debt incurred by the largely unnecessary expenditures in [[US-Iraq War|Iraq]]? Just a quick Google comes up with slightly over half a trillion dollars ($559 billion) spent there -- about 70% of the proposed bailout. (This figure would probably not be diminished much by subtracting out the amount Bush claimed it was going to cost, which I suppose one might argue we had all agreed was a worthwhile expenditure and therefore shouldn't be counted, so go ahead and subtract it out if you can find it.)
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| − | #* Just looking at the subprime mortgage question: it is ''possible'' that this was a bad call by Clinton. However:
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| − | #*# Clinton was trying to do a good thing, and as I understand it the indications at the time (aside from what the AEI said) were that it would not be harmful -- unlike many things done by Bush, where everyone (except his circle of misadvisors) was telling him to stop. If Clinton made a mistake on this one, it seems to me he can easily be forgiven because it was a reasonable mistake to make and he got so many other things right. (Like, say, [[Osama bin Laden]] being a threat.)
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| − | #*# For every default on a loan to a "minority or low income consumer", how many have remained current? (Presumably 9 years isn't enough to expect that very many would be paid off... but perhaps there is a sample of 5- and 10-year loans among those made at the time, where we could actually answer the question of net loss/profit on that group of loans. Is anyone looking into this?)
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| − | I'd really like to see some discussion of these questions before the neocons go happily shouting everywhere that Clinton is to blame for the meltdown... but I doubt that will happen, because the only truth they're interested in is whatever they can convince the overwhelmingly misinformed public to believe. --[[User:Woozle|Woozle]] 23:18, 2 October 2008 (UTC)
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