City Journal Spring 2014

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Nicole Gelinas
The Bubble President « Back to Story

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Clinton should not get a pass, so thank you for this analysis. Any thing Clinton says should be laughed off the stage. And witness his service as consultant to MF Global. What a brilliant economic thinker, that Bill Clinton.
Your article caused me to reminisce on Ferdie St Germain's antics, the S&L scandals(remember the Keating FIVE Senators), Enron's cultivation of political influence, The SEC's criminal incompetence on bernie m. and the vib's telegraphed by the anti redlining ruse of the DEM's and the subsequent daisy chaining of mortgage gimmicks during thr balloon of 2005 onward!!, and now insider trading by our oath obliged federal elected Senators and Members of Congress!
Doesn't any one go to jail any more?

"The (Community Reinvestment) Act was supposed to promote home ownership amongst low-income and minority people, and it did that by pressuring banks and lenders to drop their lending standards, so that these groups could get mortgages."

First, the mortgage problem wasn't concentrated with black people. This was a problem all over the country.

Second, no one needed to pressure lenders to drop lending standards because they did that on their own!! Banks and mortgage lenders made money from interest and fees; Wall St. made money from selling packaged mortgage backed securities; homeowners saw the value of their properties increase multiple times and flipped homes; city governments' real estate taxes increased into oblivion. Everyone was in on the take! Stop blaming one community... it was the entire nation! The US has a long history of constantly hopping onto any money making scheme.

"The Clinton administration assumed that the low homeownership rate in these groups was due to discrimination, but the fact is that the low homeownership rate was due to the fact that these folks couldn't afford these loans and couldn't pay them back."

First, don't believe the constant Black poor, underachievement drivel that's prevalent in media. There has always been affluence in Black populations - but you'd never know it because many of these people stayed in Black neighborhoods and never changed their living style (the main reason they were able to keep their money). Blacks always owned homes in their neighborhoods and continue to do so today. I'm proud to know that my paternal side of the family still owns the 13 acre parcel received post-slavery in South Carolina.

Second, the banks have ALWAYS underserved minority populations and have historically denied lending products to those populations. Its well documented. My mother remembers the rent being paid in cash when she was a child because there was no bank that served where they lived - even though they had zero debt, the family saved money and my grandfather was constantly employed.

Third, the only time affordability because a problem was when prices skyrocketed. For years, blacks owned homes in their neighborhoods - the homes were reasonably priced but interest rates and fees were always sky high. The introduction of mortgages with ridiculous terms (interest only, no money down, etc) began the downward spiral of approving mortgages to those who couldn't afford. Those products were only introduced when interest rates were cut by the Fed; banks & lenders (as usual!) realized how much money they could make in the excess fees and interest they charged those customers.
"Incredible how difficult it is to find anyone at all cognizant concerning Clinton's Community Redevelopment Act payback to the blacks for electing him into office, which backfired into the current economic debacle."

Its incredible how so many people still believe that the CRA benefitted the black population. The largest beneficiary of the CRA was POOR WHITE PEOPLE!!!! The other beneficiary of the CRA were people who opened retail establishment in Black neighborhoods that overcharged for underclass goods.

The only thing blacks got out of the CRA was hundreds of check cashing establishments.
Gold, Jerry. GOLD! Hey, Alexander Hamilton had a hand in establishing the banking system. Why is he exempt from blame?
Yes, and imagine if he had chased Osama bin Laden instead of Monica Lewinsky. We would be ahead in a lot of ways.
You said it all, Jen. Incredible how difficult it is to find anyone at all cognizant concerning Clinton's Community Redevelopment Act payback to the blacks for electing him into office, which backfired into the current economic debacle. The price society pays for pandering to the liberals cravings for unearned luxury is the real life equivalent of the 3 Little Pigs fable. Pity no culture ever learns from it, let alone what Christ would have us do.
The subprime housing crisis began with Clinton and his Community Redevelopment Act, which pressured lenders into make risky loans to people who simply couldn't pay them back. The Act attempted to coerce banks into making loans to minotities and low-income buyers who could not meet traditional lending standards. The result was a high rate of default because these borrowers could not make their loan payments.
Banks will make loans to anyone who is creditworthy. They don't care about the borrower's race, as long as the borrower has adequate income, assets, and a good credit history.
Clinton needs to utter a "mea cupla" in this mess before anyone will be interested in his opinion.
Other examples of Clintons "inappropriate" behaviours, which occasioned much jollity in the world? Take credit for what works but if caught with hand in cookie jar play cute, smile charmingly, maintain eye contact asserting I didn't do it, it wasn't me, she/he made me do it, and what difference does it make anyhoo, all is forgiven.
Once this ploy is "swallowed", then more of same, n'est-ce pas? Do the ploys work?

Clinton is even now, a "pillar" and elder statesman of the Kennedy Wing of the soi-disant democratic party of the USA. Particularly feted by East Coast, Washington and the "Blue State" "elites. While his spouse rides his coat-tails to ever greater wealth and power.

God bless those Americans who elect these people to represent them. To show they too are sophisticated, like Europeans, not merely a bunch of cowboys or puritan rubes.
Alena Hromádková November 15, 2011 at 8:12 AM
The new derivates like credit-default swaps in combination with the anonymous ownership, which is the invention of the domestic postnomenklatura legislators, doomed e.g. in Czech republic any attempt to reconstitute effectively working financial and economic systems, I think. The corrupt privatization of the state assets in the context of Mr Clinton administration´s influence didn´t transform anything essentially, polically aware citizens believe. "Old wine in the new bottles" say all my compatriots who have hoped in the comeback of the rule of
law.
Alena Hromádková, Prague
The article fails to mention that the Community Reinvestment Act was passed during the Clinton administration. This Act sowed the seeds of the sub-prime loan crisis and the housing market collapse.
The Act was supposed to promote home ownership amongst low-income and minority people, and it did that by pressuring banks and lenders to drop their lending standards, so that these groups could get mortgages.
The Clinton administration assumed that the low homeownership rate in these groups was due to discrimination, but the fact is that the low homeownership rate was due to the fact that these folks couldn't afford these loans and couldn't pay them back.
Based on these incorrect assumptions, the Clinton administration pressured, and in some cases, threatened lenders and banks to drop their traditional lending criteria. Lenders were told a 20% downpayment requirement was "too high". Lenders were told to drop their traditional loan-to-income ratios (formerly 33%). Lenders were told that income verifications had to be loosened. They were also told that income verification (tax returns, W-2s and 1099s) were no longer required. The importance of the buyers' credit history was downplayed.
The result was buyers who put no money down, who lied about their income (the so-called "liars loans"), buyers who (in some cases) had NO income, buyers whose monthly loan payments equalled 75% of their monthly income, and buyers with a poor credit history.
These lowered lending standards promoted a bubble in real estate. EVERYONE was buying houses, even those who couldn't afford it. The easy credit encouraged people to borrow money and the surge of buyers put upward pressure on housing prices. Prices went up.
Then, the bubble collapsed and defaults shot up, and we have the current housing crisis. And it's all brought to you courtesy of the US government, that didn't know what it was doing when it meddled in the mortgage market.
Clinton never acknowledged this major mistake.
Actually, no. Clinton's enduring popularity is not merely a reflection of the paucity of ideas in Washington. You may dislike Clinton and his policies. I do. But at least be honest about it. His book is a national bestseller because many people across the nation authentically like him. To claim otherwise is just silly.
Clinton did not produce a "surplus." He projected a surplus which is hardly the same thing (go ahead, look at the Treasury tables, I'll wait). His projection of a surplus was based on cuts in spending he knew were never going to occur.

That being said, I think Clinton managed fairly well. Although, as we can see, well-meaning gestures that are politically favorable now can be time-bombs down the road. But, it's all about political expediency - that's the difference between having politicians who worry about the now, instead of statesmen who think about our future.
Yes, Bill Clinton logically could also be nominated for President by Republicans and Tea Partiers, because he balanced the budget and produced a surplus.
Strange no other comment I can see on this article. This article insists on a fair sharing of blame on the financial crisis though this is somewhat against a very popular past president Clinton.
Gelinas's portrayal of Clinton's argument reminds me somewhat of what Clinton was like as president. He says "on the one hand," and, "on the other," and doesn't seem to come to a recommendation, using a cost/benefit analysis, because both approaches have serious consequences. I get a sense that he's a pragmatist, but on the other hand he wants to have his cake and eat it, too. This, I think, was what was poisonous about him. He wanted to solve problems, but he wanted to avoid the consequences of his decisions, making as many people as he cared happy and comfortable. If he couldn't do that, he'd avoid doing anything to resolve the problem, letting other people try, and take the fall. This part of him was like Obama is today, only Obama is more obstinate and less pragmatic than he was. Clinton's pragmatism wouldn't work to his advantage with the economic issues we're facing. If Clinton were president today, he'd play ball with the Republicans, if pushed (which hasn't happened yet with Obama), but I can't see a scenario where he'd come out looking much better than Obama right now.
(Bubba)
...He observes, too, that “many Americans don’t think it’s fair to modify the mortgages of people who shouldn’t have taken out risky mortgages the first place,” but that such a stance is “cutting off our nose to spite our face,” since permanent housing stagnation hurts everyone.

Ok, modify them through foreclosure. People who put nothing down anyway have been paying rent all along. They are losing nothing. Let the rental economy continue. This clearing of the market will stimulate the building industry eventually.

There is no right to own a house. It is immoral to force taxpayers to foot the bill for other people's mortgages.