Re: [asa] Deregulation Madness was Re: Ben Stein on Sub Prime Mortage Crisis...

From: Lynn Walker <>
Date: Mon Dec 08 2008 - 00:32:15 EST

On Sun, Dec 7, 2008 at 11:17 PM, John Walley <> wrote:

> But wouldn't the Community Reinvestment Act (CRA) be an example of gov't
> regulation rather than the dreaded deregulation? Wouldn't the sub-prime
> issue been avoided if not for this gov't interference in the market?
> Thanks
> John

"This was a HUGE step of *deregulation by Clinton's administration."* Read

*In 1994 Clinton put Carter's 1977 CRA on Steroids*

In 1994 President Clinton rewrote the Community Reinvestment Act or CRA of
1977. It was called the National Homeownership Strategy. Why? To help more
"deserving" minority families buy a home-a noble idea. At this time the
national homeownership rate was about 64% according to The Denver Post
(Source: The Blame Game by Greg Griffin 10/5/08).

In 1995 after Republicans took control of Congress, Clinton ordered Treasury
Secretary Robert Rubin to re-write the rules of the CRA. Whereas the CRA was
initially approved by Congress in 1977, at this time President Clinton
bypassed Congress and took control himself; knowing that the Republicans
would not approve of his plan. (source: Terry Jones in Investor's Business
Daily 9/24/08)

This rewrite of the CRA made getting an acceptable CRA rating much more
difficult for banks. Terry Jones states, "banks were given strict new
numerical quotas and measures for the level of ?diversity' in their loan
portfolios. Getting a good CRA rating was key for a bank that wanted to
expand or merge with another."

President Clinton also got HUD involved in the issue as they issued new
rules for Fannie and Freddie. First, Fannie and Freddie could now buy huge
amounts of subprime loans. In 1995, Fannie Mae bought an estimated $18.6
billion in subprime loans from banks and this number grew exponentially over

Second, Andrew Cuomo, Secretary of HUD, reduced the capital requirements for
Fannie and Freddie. Now, Fannie and Freddie only needed 2.5% of capital to
back their investments; whereas, banks needed 10%. This was a HUGE
step of *deregulation
by Clinton's administration.

Thus, the nation's banks and lenders faced incredible pressure to lend to
minorities from 1995 on from the Treasury Department, HUD, and Fannie Mae
and Freddie Mac. ... continue reading: *

Don't be fooled - we don't live under a capitalistic economic system; we are
living under an *"Interventionist"* economic system (which some like to make
us believe is "capitalism"), and it cannot last. *Central planning* can
never work and will be eliminated.

*Friedrich A. Hayek (1899-1992)

As a defender of the free market and of classical liberal principles, *F.A.
Hayek lived to see his doctrine and warnings justified by the failure of
command and socialist economies *in the late 1980's. ... *Hayek's entire
approach to economics,...emphasized the limited nature of knowledge*. *The
price mechanism of the free market serves to convey information about supply
and demand that is dispersed among many consumers and producers and which
cannot be assembled or coordinated efficiently in any other way.* *The
abyssmal failure of command economies, or of command devices in mixed
capitalistic economies, vindicated the prediction originally made by Ludwig
von Mises in 1920, and later promoted by Hayek, that only a free market
could coordinate an efficient allocation of resources into productive
industries." ..

This "Ticking Time Bomb" article was written 5 days before the Lehman
bankruptcy fiasco.
*Ticking Time Bomb Explodes, Public Is Shocked
By Robert Higgs <> on Sep 10, 2008


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Received on Mon Dec 8 00:32:35 2008

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