Background Info

IBD:

The Financial Crisis Inquiry Report blames regulators for falling asleep on the job and missing all the shoddy mortgage lending. They didn't miss it. They encouraged it...

The sham probe was led by longtime Democrat Phil Angelides, who was hand-picked by former House Speaker Nancy Pelosi. His biased report, hitting bookstores now, cites nine causes of the crisis, none of which is federal housing policy — the chief culprit...

Angelides, who pledged "a full and fair inquiry" free of "the political leanings" of the majority Democratic commission, did nothing of the kind.

He was no cold-eyed dispassionate investigator. The former California Democratic Party chairman has worked closely with affordable-housing activists, such as Greenlining Institute and Acorn, which in the run-up to the crisis shook down banks for billions in risky urban loans.

"Old civic activists never die, we just get recycled," Angelides joked with his old Democrat pal Bill Press on Press' radio show, as reported in the new book, "The Great American Bank Robbery: The Unauthorized Report About What Really Caused the Great Recession," by former IBD Washington bureau chief Paul Sperry.

Indeed. And the false narrative that capitalism is the problem and government the solution got recycled with him.

In his panel's 633-page report, Angelides denies banks were pressured by government into making bad loans.

So why then did mortgage lending standards suddenly break down? And how did so many subprime and other risky loans end up in the mortgage securitization pipeline?

The report doesn't answer these questions other than to presume lenders and Wall Street bankers became so greedy they suddenly abandoned centuries-old prudent banking practices and dove into a market they previously avoided like the plague...

The tightened CRA influenced subprime underwriting on both the primary and secondary markets. It pushed bankers into riskier territory, and pressured them to bend lending standards — or face stiff penalties and blocked expansion plans.

The changes fed the subprime bubble and sped the collapse of Fannie and Freddie. They added to the large number of subprime and other risky loans that failed in the banking crisis...

Still, the report concludes that the CRA "was not a significant factor" in the crisis, since it did not cover subprime lenders like Countrywide Financial.

But according to "The Great American Bank Robbery," Clinton's own Treasury found in 2000 that "the CRA may have had a positive 'demonstration effect' on lenders not covered by the Act, and thus indirectly increased lending by these institutions as well."

In addition, the book reports that Countrywide signed a first-of-its-kind Fair Lending Master Agreement with HUD pledging to ease its credit requirements and boost minority lending.

Hundreds of other other lenders inked similar deals with the government, committing them to riskier subprime lending. Not signing exposed lenders to fair-lending investigations and denial of access to the all-important secondary mortgage market.

Clinton also for the first time authorized Fannie and Freddie to earn HUD "affordable housing" credits by purchasing securities backed by subprime and other CRA mortgages, which HUD promoted as "goals-rich loans."

When Fannie and Freddie securitized subprime loans, they suddenly became safe, since the ratings agencies viewed their securitizations as guaranteed by Treasury...