How did we get here? Democrats of course are quick to blame Republican policies of the last eight years while failing to look at their own policies of the last thirty years. It all started with the Community Reinvestment Act of '77 , Democrats controlled all three branches of government then. This was given more teeth in '92 while all three branches were again controlled by Democrats and banks and lending institutions were given something called a CRA rating by how well they complied with the Act. The Act was a well intentioned efforts to boost home ownership in minority and lower income markets.
This essentially forced banks to make loans not based on credit worthiness but based on the race of the borrower, affirmative action lending. At this time a community organizing group ACORN started an aggressive campaign against banks in Chicago with the aid of a young attorney named Barack Obama and the financial aid of three organizations he worked for, the Annenburg Challenge, the Woods Fund and the Joyce Foundation. Stanley Kurtz, once again doing the work the liberal MSM won't do, has a detailed article in the New Yok Post that goes into this in depth.
In fact, intimidation tactics, public charges of racism and threats to use CRA to block business expansion have enabled ACORN to extract hundreds of millions of dollars in loans and contributions from America's financial institutions.
Banks already overexposed by these shaky loans were pushed still further in the wrong direction when government-sponsored Fannie Mae and Freddie Mac began buying up their bad loans and offering them for sale on world markets.
Fannie and Freddie acted in response to Clinton administration pressure to boost homeownership rates among minorities and the poor. However compassionate the motive, the result of this systematic disregard for normal credit standards has been financial disaster.
ONE key pioneer of ACORN's subprime-loan shakedown racket was Madeline Talbott - an activist with extensive ties to Barack Obama. She was also in on the ground floor of the disastrous turn in Fannie Mae's mortgage policies
This drove the demand for houses up which inturn drove the price of houses up and a vicious cycle of refinancing to pull out that equity ensued until the bubble burst and the bill came due. People were taking out interest only loans with zero down in the belief they could flip the home at a substantial profit in a couple years and then turn around and do the same thing again in an almost pyramid type scheme. It didn't work and the market collapsed into the glut.
Republicans started warning about this as early as '94 and President Bush started calling for reform in '03. John McCain pushed for reform again in '06 but they were both blocked by Democrats who didn't see a problem. Barack Obama had the gall to try and blame this mess on the lax regulation of the Republicans while his finger prints are all over the seeds that started it as Kurtz lays out. Two other Democrats, Chris Dodd and Barney Frank also share a large portion of the blame as their committees in the House and Senate are responsible for oversight of the financial markets but they blocked all efforts at reform because they are bought and paid for by those that made millions to look the other way as the scam continued. In short if blame is to be put anywhere it is squarely in the laps of the Democrats.
They forced banks and lenders to loan money to people that couldn't pay it back and unscrupulous lenders smelling profit took advatage of it by then selling the bad paper to Fannie and Freddie whose CEOs then cooked the books for their benefit. That is what lead us to where we are today.
Update: Wow even clear headed liberals know where to place the blame, go PUMAs.