Big Government's Big Role in the Credit Crisis

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Ignore the lending standards disappearing, the unprecedented ly low interest rates, the radically deregulated market -- that's all irrelevant. Its the CRA
Is everything just a talking point, or does reality matter at all?
The GOP as I knew it -- smaller government, lower taxes, balanced budget, strong military, minimum overseas involvement except where absolutely necessary -- is now long gone. You guys killed it. Reality doesn't matter. The far right has hijacked what was once an honorable institution, and turned it into a parody of itself.
The GOP is lost, the fiscal conservatives no longer matter, and the religous zealots and far right control the party.
I SUGGEST YOU FIND A HEAPIONG PILE OF REALITY AND DAMN QUICK OR THE REPUBLICAN PARTY WILL TAKE MANY YEARS TO RECOVER
You guys deserve to wander in the desert for 40 years . . . (hey, a biblical reference!)

Barry Ritholtz of NY 6:29PM October 03, 2008

The government is run by immature self centered people. They are concerned with one thing and one thing only :Re Election. It is clear they are squandering tax dollars for their own agenda not the agenda of citizens.

chrsi of NV 5:10PM September 27, 2008

Problem with this type of reasoning is it lumps different people and different laws/regulations together as 'government'. It's like talking about 'the media' like it is a single entity. There were many irresponsible actors that led to this mess, not one. At every level from unqualified borrowers taking doomed to fail loans pushed by deceptive brokers all the way up to the investors who ignored the problems inherent in speculating of complicated credit derivatives. But while we're on the topic of government let's not forget things like the
Gramm-Leach-Bliley Act
and
Commodity Futures Modernization Act
that allowed banks to get so big and for everyone and anyone to enter the credit default swap markets with totally irresponsible leverage.
Yep, it's easy to blame 'the government' or 'the media'. It's much harder to set down the blame finger for a moment and understand all the elements of the current crisis.

b hallmark of AZ 5:45PM September 22, 2008

What an incredible fairy tale the GOP is telling - where Phil Graham is the hero rather than the villain and Carter (not Bush deregulation) is to blame for the collapse of the market!!! Only a Disney movie could spin a finer fairy tale. I think I woke up in Bizarro World.
The CRA only accounts for a small number of loans in the subprime market. And of those, only a small number (statistically speaking) defaulted. The vast majority of the defaulted loans came from institutions not governed by the CRA. And the REAL root of the problem is deregulation which made credit-debt swaps and CDOs being sold as "low-risk" totally invisible.
Contrary to the GOP's fantasy, the entire financial collapse was orchestrated by the "hero" in the GOP's tale: Phil "Americans-are-a-Bunch-of-Whiners" Graham. The villain in his story? Yep, you guessed it: bleeding heart libruls and their "pet" minorities.
To the readers out there: you are being slowly manipulated by the "blast-faxing" efforts of Rove & Co. Having spent time in the conservative inner circles, let me tell you how the GOP dupes you: when a story looks like it's going to hurt the Republicans, the GOP calls all their loyal "soldiers" by blast-faxing them (or email). Everyone gets on the same "talking points" and it is repeated over and over until the American public believes it. That is what is happening here.
People like Jonah Goldberg are well-known soldiers for the right. So was I. But enough is enough. The GOP policies have destroyed this nation and must be they exposed for what they are. Lies.
I am not saying McCain is the answer, but he's a good man and learns much more quickly than the current President.
I believe he has learned from the crash and will do the right thing.

Rory Talbot of TX 1:24PM September 21, 2008

It is amazing to think that while this economic crisis was brewing congress was focused on drug use in professional baseball.
Consider also that after 35 years we still do not have an energy strategy.
This list could go on, but the ability for rational thought seems to be - at best - grid locked.
The countries ability to pick competent leaders is at an all time low. Congress is especially disgraceful.

John Hogan of SC 12:27PM September 21, 2008

As I can see where Mr. Petholukis is placing most of the responsibility for our economic MESS (government, please italic), perhaps if the private sector tried to keep raises closer to or matching the rate of inflation; if people worried less about buying $1,000 purses and jeans and more about making our school system among the best in the world; if we fight the wars that make the most sense for truly protecting our nation instead of wasting billions each month and putting our brave soldiers in harms way for a war that has not kept us more safe; we would not all be here trying to pass the buck on who is to blame. It's greed that's to blame; our natural urge for power and money (i.e., greed).
PS - It's narrow minded to think one president alone caused this. It was Bush who blew the government surplus, and let big business do pretty much what it wants and pay trivial taxes.

A. of CO 11:31PM September 20, 2008

In 1995, as a result of interest from President Clinton's administration, the implementing regulations for the Community Reinvestment Act were strengthened by focusing the financial regulators' attention on institutions' performance in helping to meet community credit needs. The 1995 revisions were credited with helping to substantially increase the amount of loans to small businesses and to low- and moderate-income borrowers for home loans.
The revisions allowed the securitization of CRA loans containing subprime mortgages. The first public securitization of CRA loans started in 1997. 16 - 1/2 years ago.
As Stan Liebowitz, a University of Texas economist has pointed out, a Fannie Mae Foundation report enthusiastically singled out one mortgage lender that followed "the most flexible underwriting criteria permitted." That lender's loans to low-income people had grown to $600 billion by 2003. Its name? Countrywide, the largest U.S. mortgage lender and one of the lenders in the most trouble for its lax lending practices.
Mainstream banks were forced to loan money to borrowers they never would have, had government regulation not forced them to. Additionally, government regulation encouraged Wall Street to package the loans that never should have been made into negotiable securities and sold, and resold. This made these high risk securities backed by the loans, which never should have been made in the first place, popular with the hedge funds and investment banks worldwide - since they had a high yield. This created tremendous demand back down the pipe for more of these securities, which accelerated even further the building of homes that never should have been built, and sold to buyers who could not afford, nor had the ability to borrow, which overbuilt the entire housing market and deflated the value of all houses.
The genesis of the entire mess is GOVERNMENT wrongly demanding a solution to so-called “affordable housing”, adopting the attitude that Banks were racist for "wink & nod" redlining, then ordering banks to loan money to people NOT based upon credit standards that protected the bank and the public that insures them..
President Clinton ran on a platform of re-inventing affordable housing in 1991. He culminated his signature effort by signing the "Community Development Banking Financial Institutions Act, Sept. 23, 1994", which contained within it a reformation of the "Community Reinvestment Act".
The investment banks, pension groups, sovereign wealth funds, Hedge funds, GSEs (including Fannie Mae & Freddie Mac) all purchased MBSs then used them as cash downs to purchace 20 times the amount in derivatives and other high-risk securities. When the cash down (MBSs) lost market value, all the other securities they anchored were called. - OUCH!
This is what collapsed the world, as we know it.

Edward Holman of TX 7:17PM September 18, 2008

I think we should get rid of each and every one of them ASAP

jO of MA 6:03PM September 18, 2008

Since all these financial institutions are going belly up, should the Congressional leadership on both sides in charge of oversight be relieved of their duties? They are not my representative, so I cannot vote for someone else, but the people in charge of this oversight needs to be changed. Those Wall St. and Phony/Fraudy executives have lost their jobs and their protectors in Congress should lose their leadership roles as well. Where is there accountability?

Joe of NY 5:13PM September 18, 2008