You are likely to be hearing a lot about The Community Reinvestment Act about over the next several months and probably stretching into the next election cycle. This is a story that has a lot in common with the ACORN story. ACORN is the organization blamed by John McCain and Lou Dobbs for "ruining the fabric of our democracy". ACORN hires people to go out into the field and register voters. Sometimes the people they hire are unethical and lazy and instead of registering real voters they go out and make up names in order to try to get paid for them. When they turn in these names to get paid ACORN is mandated by law to hold onto these fraudulent voter registrations. They cannot throw them out. Because of this they are often in possession of "fraudulent voter registrations" and frequently criticized by the media as trying to rig elections. A similar thing is now happening with the current mortgage crises. Take for example the below material taken from another blog
"Sources point to Obama as a possible starting point to the domino affect that lead to the housing crises we are now facing. Check the provided links and judge for yourself.
“In a 1995 case known as Buycks-Roberson v. Citibank, Obama and his fellow attorneys charged that Citibank was making too few loans to black applicants and won the case. As one commentator noted in May 2008, legal “successes” such as this were probably responsible for the sub-prime mortgage crisis of 2007 AND 2008. That is, banks were not loaning to blacks whose credit was poor. When the law forced them to lend money anyway, the inevitable collapse occurred.”
Obama had a part in the lawsuit that started the government on a course of forcing lenders to give more loans to those who had poor credit. Lending companies were forced to come up with imaginative ways of fulfilling the quota that was required. Sub-prime lending was born as a result. The mortgage crises was forecast by many who were able to look beyond the quota."
In this interesting piece nowhere is mentioned the concept of Collateralized Debt Obligations ("CDO's). CDO's were the invention of Wall Street and not some small group of Civil Rights lawyers. CDO's were certain large financial institution's way of packaging very large pools of mortgages which were sliced up into "tranches". These complex financial instruments were then used as collateral to back up large bond offerings that were given the highest rating by Standard & Poor's and Moody's, two of Wall Street's major bond rating firms. These fresh new derivative securities were sold to large pension funds and other institutional investors who bought them because of the AAA credit rating.
It is believed by many economists that the sub-prime mess was driven largely by world-wide demand for these high-yielding mortgage backed derivative bonds and notes. The market for them was estimated in the trillions. The demand for these bonds fueled demand for the underlying mortgages that go into making up these instruments. In short Wall Street needed more mortgages and they began to call up the mortgage brokers to try to get some that they could package into more CDO's.
To compound the problem, some smart Wall Street types have come up with other interesting products that banks and brokerages can use to protect themselves in the even of default on the underlying mortgages. These instruments are called Credit Default Swaps (CDS). A bank or other firm can buy a credit default swap to get some protection against a bond issue going bad. If the bond issue goes bad (misses a payment) the holder of the swap gets paid off. They are like insurance policies in some ways. The same banks could also sell credit default swaps as a way to gain extra income. The problem with credit default swaps is the so many of them have been issued that it is estimated that as much as 60 trillion dollars in notional value of them are or were outstanding. This is on orders of magnitude several times larger than the total GDP of the planet earth.
It is the credit default swaps that got AIG into trouble. They were a very big seller of them. They simply did not have enough money to pay off on all of the insurance that they wrote in connection with the credit default swaps and they busted out. Other Wall Street firms who were holders of AIG swaps were understandably in danger of not being able to collect on them. This put their future in doubt because they were relying upon this form of insurance to protect them against defaults on all of the risky mortgage debt they held. When Wall Street began to drive down the stocks of otherwise healthy firms simply out of fear that the targets would fail if AIG failed, then the crises snowballed across the globe.
As it is hard to see how a small group of civil rights lawyers could do all of this, I would suggest that it is a stretch to lay the mortgage meltdown at the feet of Barrack Obama.
About The Author:
This artice was written by Mark Soveign who owns and writes for Wertheim Communications LLC as well as Mooker.Com