Money-mad psychopaths were able to convince the government to deregulate important parts of the financial markets, allowing them to glut their inhuman avarice, and when it all went sour, those same psychos were bailed out by a corrupt bipartisan political maneuver to further rob the taxpayers of the world and put their hard-earned cash right in the pockets of the same people whose criminal behavior had led to the crisis in the first place.
That's what we all know, what we all seem to agree happened. But it may not be true.
The 1999 repeal by Bill Clinton of the Glass-Steagall Act could have had no legitimate protection for what followed in 2007-2008. Glass-Steagall applied to federally insured commercial banks, and it barely did anything more than ensure that those specific banks couldn't speculate in derivatives with depositors' money, of which Mortgage Backed Securities (MBS and PMBS) were one. Investment banks, like Bear Sterns, Lehman Brothers, Goldman Sachs, and Merrill Lynch were not commercial banks. AIG (American International Group) was an insurance company and Country Wide Financial was a Savings & Loan, not a commercial bank. Almost the entire list of major players and losers in the 2007-2008 Great Recession, including Fannie Mae and Freddie Mac, were not commercial banks.
Another piece of legislation often put forward as a possible contributing factor in the 2008 crisis is the Commodity Futures Modernization Act, also signed into law by Bill Clinton (busy bee that he was) in 2000. This legislation essentially deregulated Over The Counter (OTC) securities and derivatives, which were intended to be traded by "sophisticated investors" like investment banks and hedge funds. This removed regulations relating to the required amount of capital and leverage that could be used within OTC markets. The CFM was ultimately passed because "the spice must flow." OTC markets are not in any way like the stock market with its central exchanges, they are real time decentralized peer-to-peer trading networks. The most important form of OTC are Currency Exchanges, called Forex. These derivatives from currencies to commodities, like oil and gold, are traded 24/7 from Asia to Europe and round again, to the tune of about $5 trillion dollars in a 24 hour period.
At its heart, aside from a few technical differences, a CDS is just a life insurance policy. You pay a premium, and if the debtor defaults on the loan, you get a tidy settlement. The problem, in the case of AIG, was that they never expected so many mortgages to fail and so they didn't have sufficient reserves to pay those who had taken out a CDS.
This leads us into yet another deregulation often blamed at least in part for the 2008 crisis: the overruling on the 28th of April 2004 of the Net Capital rule, which dovetails into why so many of the insurance companies, mortgage lenders and S&Ls as well as investment banks took such a dive. They didn't have sufficient liquidity, a fancy way of saying: they were broke. This is generally why a casino makes you buy your chips at the door, god forbid you should make a bet you couldn't cover.
To be fair, this deregulation was in fact instrumental in the crisis of 2008, but why it was deregulated is most likely not what you think. In general leveraging is a necessary and good thing. It's also dangerous. And when the final heat death of the world economy inevitably happens, it will play its part.
In AIG's defense, they had every reason to believe that mortgages were the safest bet in town. It was not so much that America had experienced 20 years of prosperity, but more specifically for about 30 years, the default and delinquency rate of mortgages was 1.7%.
The mortgage market began suffering serious problems in mid-2005. According to data from the Mortgage Bankers Association, the share of mortgage loans that were "seriously delinquent" (90 days or more past due or in the process of foreclosure) averaged 1.7 percent from 1979 to 2006, with a low of about 0.7 percent (in 1979) and a high of about 2.4 percent (in 2002). But by the second quarter of 2008, the share of seriously delinquent mortgages had surged to 4.5 percent. These delinquencies foreshadowed a sharp rise in foreclosures: roughly 1.2 million foreclosures were started in the first half of 2008, an increase of 79 percent from the 650,000 in the first half of 2007 (Federal Reserve estimates based on data from the Mortgage Bankers Association). No precise national data exist on what share of foreclosures that start are actually completed, but anecdotal evidence suggests that historically the proportion has been somewhat less than half (Cordell, Dynan, Lehnert, Liang, Mauskopf, 2008).The Law of Large Numbers was actually on the side of AIG and other MBS participants. Mortgages had been tried and tested for 30 years, so the suggestions of The Big Short are incredible as they attempt to paint Wall Street financiers as crass Neros, fiddling while Rome burned. All available data up to that point, as well as a generation of experience, made mortgages, and therefore MBS, like CDOs, safe as ... well ... houses.
-- The Rise of Mortgage Defaults, Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs Federal Reserve Board, Washington, D.C., 2008
How Columbo can help
Columbo, the detective, has outlined his process of finding who dunnit, by asking some simple questions. What was there then, that isn't there now? What is there now, that wasn't there then? And what has been moved? If you can answer all three of these questions then you can be reasonably sure just who dunnit.
From 2004 to 2007, the rate of default for subprime loans went from 11% to 25%. For prime loans it went from 2.4% to 5% (Profitwise News and Views, Chicago Federal Reserve). In fact, defaults for both types of mortgages began increasing year by year since 1994-1995, with the sharpest increases beginning after 2005. So the question is, from the Columbo perspective, what was there before that isn't there now? What got moved? Of course, it takes a credulous individual to believe that a greedy banker would bet all or most of their money on something that wasn't a pretty sure bet.
So why did they?
Slow down there sparky, what is a subprime mortgage or loan?
This is where a lot of people are actually very confused. A subprime mortgage is really just a fancy term for "a mortgage to someone who will probably never pay it back."
When a person decides to take a loan (in this case a mortgage, but there are other types of subprime loans, like payday advances and so on) the lending institution tries to gauge how likely they are to pay it back in a timely manner. The more likely you are to pay the money back - the more likely you are to receive the 'prime rate', and therefore your mortgage would be a prime mortgage.
Prime is a classification of borrowers, rates or holdings in the lending market that are considered to be of high quality. This classification is placed on those borrowers that are deemed to be the most credit-worthy and the prime rate is the rate that a lender will lend to its high quality borrowers.In some senses, "the prime rate" is the lowest rate that money may be borrowed from commercial lending institutions. However, a subprime rate (at a rate lower than prime) should then be good, right? Well, actually no - subprime mortgages have nothing to do with "prime rate."
-- Investopedia
Subprime mortgages are also called Alt-A mortgages, or really any loan that is "subprime" can also be called Alt-A, and these are all code words for the basic truth that subprime and Alt-A are loans to poor people - usually ethnic minorities.
Lending institutions have to lend subprime mortgages. I'm cutting through a lot of hemming and hawing and justification, but the basic truth is, in order to not get sued or protested against, banks pretty much intentionally lend money to people they know are going to default as a cost of doing business so that when anyone comes along and claims they're discriminating against poor minorities, the bank can point to their subprime and Alt-A loans as a defense.
Part of this is tied up in the concept of the FICO score, which is a way to identify poor minorities without ever actually meeting with them, in fact the banks scrupulously ensure that the person who decides on granting the loan doesn't know anything about the race or gender of the loan seeker and only has the barest minimum of numbers to work on.
The bank sorts all of the loan seekers with a FICO score of less than 660 into a pile, and randomly chooses who they'll lend to, usually at a justifiably higher rate of interest due to the increased risk. None of this is official, but it's probably what happens in general terms at most lending institutions.
Dismissing a long struggle
It's not my intention to make light of the civil rights struggle in the U.S. during the 50s and 60s, nor to belittle the achievements of Martin Luther King, Jr. But for our purposes we're gonna skip over them to the effort to integrate neighborhoods. So that I don't have to spend an inordinate amount of time with this part of the article, watch this video:
After the success of the civil rights movement, the main effort of activists was to integrate traditionally white neighborhoods, and to encourage Blacks to redistribute into city blocks and suburbs that were, up until that point, a majority white. Unfortunately, Blacks generally could not afford to choose the better neighborhoods, nor could they get loans to purchase housing in more upscale areas because the banks did not consider they had sufficient income to pay back the loans. At the same time higher income whites were leaving in droves for the suburbs, and the banks generally tended to follow them out of the inner city, which no longer appeared a lucrative investment opportunity for lenders. For one activist, this was clearly unacceptable.
Gale Cincotta nee Aglaia Angelos was an activist in Chicago, the daughter of middle class Latvian immigrants who had escaped a failed socialist revolt in 1905 and fled to the United States. She grew up in the community of West Garfield park, and later moved in the Austin area of Chicago. In the 1950s she was involved with several battles with the School Board to improve the quality of education and community infrastructure. Austin at that time was not an investment interest, and it steadily declined until the 1960s when there was a massive exodus of the largely white blue collar population to the suburbs and an influx of ethnic, largely Black, minorities. To this day Austin is 81% African American.
After the 1968 Chicago Riots, even the majority of blue collar Black families were leaving Austin, but Cincotta decided to stay and fight. The main issue for Cincotta and those like her was that lending institutions refused to extend loans to the poor, often labeled as "low-income." Mainly because they couldn't pay back the loans. Cincotta subscribed to the idea that other people's money is an entitlement, and forced altruism is an acceptable means to an end.
Cincotta and her band of merry socialists formed a movement called The National People's Action and campaigned to get Congress to compel the banks to invest (read lend to) money in poor communities. She was successful, and in 1977 the 95th United States Congress passed the Community Reinvestment Act, or CRA. Whether or not you agree with their position is an ideological ripple that really doesn't matter. Suffice it to say, for whatever reason (mainly because they didn't want to) banks had to be forced to lend money they otherwise wouldn't to "low-income" individuals, i.e. people who had a much higher risk of default.
Banks, as businesses, did exactly what was expected they would do and came up with many creative ways to not have to give money to people who could not pay it back. Throughout the years there were several amendments to the CRA, some benefiting advocacy groups which required the Banks to reveal more about their approval processes which the activists suspected were racist, and others that helped them to mitigate the expense via donations, or writing off losses to low income borrowers.
In 1992 yet another amendment was added, thanks to the advocacy and testimony of Cincotta and various supporting groups that would change the course of financial history.
Ex Texas
After the assassination of JFK, his vice president Lyndon Johnson took over the job and immediately dug in deep with the Vietnam War. All moral questions aside, the War (as all wars are) was very costly. In order to fix up the budget in 1968, he decided to fully privatize The Federal National Mortgage Association (it had already moved in that direction in 1954). Not wanting to relinquish total control of a government administration that had been a staple of American life since the 1930s (FNMA was part of the New Deal), Johnson created a Frankenstein Fascist Monster in what would come to be lovingly monikered Fannie Mae.
Fannie Mae's traditional role was to buy up mortgages, including but not exclusively risky mortgages, and prevent people from defaulting or going broke and losing the farm. FNMA was essentially, a government project to simulate wealth by subsidizing home ownership in the U.S. in so doing by purchasing short term loans (at that time most mortgages were 3-5 years and had to be refinanced often) and drawing the payments out or coping with defaults more gracefully than would a bank.
In 1968 Congress enacted the Housing and Urban Development Act, which divided the functions of Fannie Mae between two entities. Fannie Mae became a government-sponsored private corporation and was allocated the secondary market operations of the former entity. Ginnie Mae remained a division of HUD and was given the special assistance and the management and liquidation functions of the former Fannie Mae. In 1970 the Emergency Home Finance Act authorized Fannie Mae to purchase conventional mortgages and created the Federal Home Loan Mortgage Corporation (Freddie Mac) which is now almost identical in its charter and functions to Fannie Mae. Finally, the Housing and Community Development Act of 1992 established the Office of Federal Housing Enterprise Oversight (OFHEO) as an office of HUD to monitor both Fannie Mae and Freddie Mac. The 1992 act also increased the role of both Fannie Mae and Freddie Mac in making mortgages available to borrowers with very low, low, and moderate incomes by requiring them to make money available for the purchase of these mortgages.Now that Fannie was to have public shareholders, the Democrats needed a way to ensure that the business could still meet its low income lending goals, so it was Congressionally Chartered, provided with a Treasury line of credit (it could basically "print" the money to buy the loans), and had at least the implicit backing of the U.S. government. They needed to do this because Fannie would be holding large "assets" of what would become known as "subprime" loans (in fact it was specifically chartered to create a "secondary market" for such loans, and to buy them from lending institutions) that would prevent it from receiving a AAA credit rating so that it could achieve necessary leverage.
-- Encyclopedia.com
Fannie was exempt from SEC rules and securities laws, so any and all regulations that might have saved everyone from the crisis would not have applied to Fannie Mae anyway.
(1) provide stability in the secondary market for residential mortgages;To be clear: Fannie Mae was created to incentivize banks to lend money to Americans by ensuring a buyer for more risky and less profitable loans existed. That is, it created a "secondary market" where banks could sell suspect mortgages to get them off their books. It was, in essence, a kind of welfare administration.
(2) respond appropriately to the private capital market;
(3) provide ongoing assistance to the secondary market for residentialmortgages (including activities relating to mortgages on housing for low and moderate-income families involving a reasonable economic return that may be less than the return earned on other activities) by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing;
(4) promote access to mortgage credit throughout the Nation (including central cities, rural areas, and underserved areas) by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing; and
(5) manage and liquidate federally owned mortgage portfolios in an orderly manner, with a minimum of adverse effect upon the residential mortgage market and minimum loss to the Federal Government.
-- Fannie Mae Charter Act
When Lyndon Johnson privatized it, it suddenly became a for profit company (hence "involving a reasonable economic return"), with an incentive to minimize risky investments. Its Congressional Charter ensured that it was still intended to manage a secondary mortgage market. That secondary market would later grow into the market of PMBS and the now infamous CDOs (as part of their mission to "increase the liquidity of mortgage investments"). i.e. the market for these instruments was created by the government, and itself was not subject to government regulation. It was, however, subject to congressional oversight, and we'll get to that later. For the purposes of time and space I am simplifying the letter, but not the spirit of what happened. The technical and political details of Fannie Mae acted as a barrier for anyone to really know what it was doing, what it was for, or even how it worked.
The Senate Committee on Banking, Housing, and Urban Affairs, Financial Institutions and Regulatory Relief
Jeez, what a mouthful. Unfortunately getting direct access to the testimony of these obscure subcommittees pre-1995 is like pulling teeth and isn't possible online. Suffice it to say that such a committee meeting did in fact take place on February 28th, 1991. Gale Cincotta, our intrepid crusader for community investment testified before the subcommittee on Financial Institutions and Regulatory Relief in a bid to make her hard-won CRA effective.
Lenders will respond to the most conservative standards unless [Fannie Mae and Freddie Mac] are aggressive and convincing in their efforts to expand historically narrow underwriting.The essential issue was that lending institutions were too conservative, and had been so for about 20 years at that point. That was why the mortgage default rate was around 1.7% or peaking maybe at 2% on the rare occasion. Despite the fact that Cincotta and her allies were generally grinding on the "predatory lending" practices of these institutions, the activists' real problem: lenders weren't predatory enough.
-- Gale Cincotta, Testimony before The Senate Committee on Banking, Housing ... yadda yadda.
Up until that point, lenders had created loans that only truly insane people would take, and were designed to compensate in the best case for the extreme risk the banks were being forced to take with public investors' money by lending to low income borrowers at all. Despite these supposed predatory lending practices, the lenders just weren't very hot to trot in making these high risk, variable interest loans. If you read between the lines of what she is saying, you will see the upside down narrative of so-called predatory lending.
After 1968, Fannie Mae, and other so-called GSE's (Government Sponsored Enterprises - read fascist) like Freddie Mac and Ginnie Mae suddenly have public investors (even though they were privately owned) and they wanted to make money. What they did was adopt underwriting procedures that were conservative; they were looking for sure bets - i.e. Prime Mortgages.
Leading up to 1990, Fannie Mae had been chaired by David Maxwell, who'd steered the ship through the rough and tumble 80s and ensured that it was a profitable business. In 1985 Fannie Mae came under fire because it was intending to tighten its belt even further. An NY Times journalist, Andree Brooks, wrote in an article titled Talking Fannie Mae: the tight new rules on loans, that these new rules seemed to be "a particularly cruel blow to lower-income buyers and their dreams of home ownership." At the time of the article Brooks assured readers they could still take out loans with LTV (loan to value) ratios of greater than 90% (less than 10% cash down) from other lenders who were not following suit with Fannie Mae. Of course, these other lenders did follow suit, because lending to someone with a greater than 90% LTV is mad.
In 1991, HUD (Department of Housing and Urban Development) released a report titled Not in My Backyard: Removing Barriers to Affordable Housing, which claimed, "the market influence of Freddie Mac and Fannie Mae extends well beyond the number of loans they buy or securitize; their underwriting standards for primary loans are widely adopted and amount to national underwriting standards for a substantial fraction of all mortgage credit."
Maxwell, seeing the writing on the wall, decided to enlist James A. Johnson, who was a well-known Democratic "operative", as a financial consultant. Johnson also opposed efforts to fully privatize Fannie Mae because he understood that Fannie's central role in the secondary mortgage market was supported by the implicit - but wrong - suggestion that Fannie Mae was backed by the U.S. Government, making them appear like a very safe bet for investors. Johnson succeeded Maxwell to chair Fannie Mae in 1991.
Johnson saw this Affordable Housing Junta forming in Washington made up of activists, advocates and the usual opportunistic psychopaths who exploit those with morbid empathy. Johnson, obviously politically savvy, had the brilliant idea of championing them by hitching Fannie Mae to a congressional affordable housing goal that would have wide support, especially among the "leftists" chomping at the bit. While he himself was obviously out to exploit Fannie Mae's public position as a mortgage market leader, he saw no problem in an about-face on underwriting standards, thus shaping Fannie Mae into a low-income lender par-excellence.
What Johnson didn't want to lose was the Congressional Charter, the implicit government backing, and the treasury line of credit. From his perspective they would plump up their holdings of subprime loans to say 30% of assets held. A high percentage of those would default or frequently be delinquent, but others would eventually be partially or wholly paid off. At the same time, Fannie (and Freddie) could pad their assets with juicy prime loans bought with their treasury line of credit (almost free money) and line the pockets of Fannie shareholders (and Johnson's pockets into the bargain).
I can't actually read minds, so I am just spitballing at this point. Perhaps Johnson was just your garden-variety ideologue who really wanted to help the poor, but somehow I doubt that. Leading up the the mid-1990s, smoking-gun proof for what happened is hard to come by. Morgenson and Rosner, in Reckless Endangerment, wrote that "while Johnson and his crew knew the risks among such [subprime] loans ... they also recognized that meeting affordable housing goals would give Fannie Mae enormous political cover for its growth plans."
The Clintons, and therefore the Democrats, were taking power in the U.S. and he could be reasonably sure that the next 8 years (starting in 1992) would require Fannie Mae to be on the right ideological side of politics. This is backed up by Timothy Howard CFO for Fannie Mae in the 2000s, who writes in The Mortgage Wars that Johnson "understood that leadership in affordable housing was essential to maintaining our congressional support." Somehow I doubt the ideological purity of Johnson; it wasn't really about the poor at all, but he could smell the way the wind was blowing.
Sentiment about underwriting standards was turning decidedly against the lending institutions, so to head things off at the pass, in 1991 Johnson announced a $10 billion commitment from Fannie Mae to provide mortgages to low income home seekers under a program he called "Opening Doors." By 1994 Fannie Mae was promising to add another $1-trillion commitment. The press release from Fannie Mae stated at the time that "this initiative encompasses one of the most far-reaching commitments ever made by the company: to eliminate any final 'no' in the mortgage application process." (Emphasis mine).
As with most social justice programs, other peoples' money is an entitlement. The shareholders of banks, who aren't really people after all, have no right to any kind of standard, and no right to tell anyone 'no'. The fact that these borrowers couldn't pay the loan back was of course irrelevant, because every person is entitled to a house, at their or someone else's expense.
In all fairness, if things had ended there Johnson's plan may have worked out. It was risky, but not hopelessly risky, and it was something he could sell to the public investors of Fannie Mae. By keeping their government backing, and the implicit security that provided them, they could make a lot of money. As we will see, how exactly Fannie Mae and other lenders turned losers into winners is intricately tied up to what happened when it all came crashing down.
What ended up happening was not planned, and couldn't have been. By creating in Fannie Mae and Freddie Mac a captive purchaser of subprime mortgages, the social justice warriors and the social democrats threw chum in the waters. As it would turn out, two particular kinds of financial predators smelled the blood and came running.
Social Justice - Engineering Outcomes
The core ideology of social justice, or perhaps the core methodology, is to identity some area of human endeavor and notice that some people are doing comparatively poorly, and others comparatively well. The next step is to define those doing poorly as victims and those doing well as perpetrators, and set about designing the ideal outcome which is always radical parity. Nothing in life is due to choice or merit, it is only the haves oppressing the have nots.
Racial Gap Detailed on MortgagesIf you buy the above - I've some ocean front property in Arizona to sell you.
By MICHAEL QUINT, Published: October 22, 1991
WASHINGTON, Oct. 21— The most comprehensive report on mortgage lending nationwide ever issued by the Government shows that even within the same income group whites are nearly twice as likely as blacks to get loans.
The study, the broad outlines of which emerged last week, was based on 5.3 million mortgage applications received by 9,300 banks and other lenders last year. It raises questions about whether banking regulators have done an adequate job in dealing with discriminatory lending. In evaluations by regulators, about 9 out of 10 banks have been rated as satisfactory or outstanding in serving their communities.
...
Because the Fed study included data on rejected applications, it went far beyond earlier studies that had found that poor people receive fewer bank loans than wealthy people, and that nonwhites, who are on average poorer than whites, receive fewer loans than whites.
Representative Henry B. Gonzalez, the Texas Democrat who is chairman of the House Banking Committee, said the report showed discrimination in lending to be so pervasive that it was inflicting great pain across the country, whether or not the discrimination was intentional. In a letter to President Bush, he said regulators were to blame for not enforcing fair-lending laws, and he urged the President to call a meeting of community leaders and bankers.
His remarks were echoed by Senator Donald W. Riegle Jr., the Michigan Democrat who heads the Senate Banking Committee. Mr. Riegle said banks and their regulators had not given the issue of discrimination in lending "the attention it deserves."
Maude Hurd, president of the Association of Community Organizations for Reform Now, a group frequently critical of bank lending practices, said the study showed that "if you're a minority, our nation's banks want only your deposits, not your loan application."
...
Cathy P. Bessant, a senior vice president at the NCNB Corporation in Charlotte, N.C., noted that the use of standardized loan applications inevitably resulted in higher rejection rates for minorities than whites. But she said that NCNB, like many other banks, had introduced lending programs that adjusted the approval criteria in ways that helped minorities.
The study showed that in every income category, and for every kind of mortgage loan, black and Hispanic applicants were far more likely to be rejected than whites. In the case of low-income applicants for Government-backed mortgages, which are popular because they require relatively low down payments, 29.4 percent of black and 22.4 percent of Hispanic applicants were rejected, compared with only 14.7 percent of whites. Among high-income applicants, 20.8 percent of black and 14.2 percent of Hispanic applicants were rejected, compared with 8.6 percent for whites. Regional Variation Noted.
The Federal Reserve Bank of Boston (who??) released a report in the final weeks of the run-up to the 1992 election (convenient time, eh?) that backed up the findings from the study detailed in the New York Times, stating unequivocally that black and hispanic "minorities were two to three times as likely to be denied mortgage loans as whites. In fact, high income minorities in Boston were more likely to be turned down than low income whites."
Eventually a study of the numbers was conducted by James A. Berkovec, Gleen B. Canner, Stuart A. Gabrial and Timothy H. Hannan called "Mortgage Discrimination and FHA Loan Performance", and published in Cityscape: A Journal of Policy Development and Research (February 1996). Want to guess what it found? Well, you won't have to, because here are the findings.
SummaryUnfortunately, the narrative was already set. Apparently the only bound the Greed of Bankers knows is racism. That of course is utter nonsense - greed is the least racist sin. Not to be dissuaded by facts, the social justice warriors and the psychopathic power-mad Democrats who wanted to exploit them dove head first into mandating outcomes for minority borrowers in legislation conspicuously misnamed the Federal Housing Enterprises Safety and Soundness Act.
Recent years have witnessed widespread allegations of racial discrimination in mortgage lending. A model of discrimination in credit markets suggests that discrimination carried out by setting higher qualification standards for minority applicants or applicants from minority neighborhoods may be revealed in differential performance of loans extended to these groups. This predicted effect of discrimination is the basis of the empirical tests used in this analysis.
The empirical results do not support a finding of widespread racial bias in mortgage lending. The main empirical finding is that, after controlling for a wide variety of loan, borrower, and property-related characteristics, default rates for black borrowers are higher than those for white borrowers. This finding is the opposite of the prediction of the model for lender bias against black borrowers.
-- Mortgage Discrimination and FHA Loan Performance
(7) the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation have an affirmative obligation to facilitate the financing of affordable housing for low- and moderate-income families in a manner consistent with their overall public purposes, while maintaining a strong financial condition and a reasonable economic return ...Activists were mainly interested in impacting minorities, who largely fit into the class of low to moderate income, or LMI (generally 80% or below the median income for a specific area). What they got, and were tentatively satisfied with, was a quota system called the "affordable housing goals." The quotas forced Fannie Mae and Freddie Mac to buy a certain number of mortgages per year that were made to LMI borrowers. Henry Gonzales, the chairman of the House Banking Committee ended up delegating the drafting of the affordable housing goals to a "work-group" populated by activists, specifically ACORN (Association of Community Organizations for Reform Now). Look into them, they're worth some scrutiny.
-- Federal Housing Enterprises Safety and Soundness Act
Now that you have an idea of how the 2008 Banking Crisis was a Social Justice Warrior-inspired disaster waiting to happen, in Part 2 I'll explain exactly how it played out, and the ways in which SJWs in government continue to wreck the country, and the world. Fun times!
The author of this article is somehow alluding... nay,... outright saying the financial collapse WASN'T the Banks and Financial institutions fault and that it was inevitable as death from old age. They're flat out wrong. They fail to address that the mortgage lenders were DELIBERATELY flooding the system with sub-prime loans and then betting that they would eventually fail, hence 'The Big Short'... shorting a companies stock for a large payout ('shorting' is essentially saying the stock will go DOWN instead of up and gaining profit that way).
What these financial institutions and lenders were doing was essentially loading the market with loans they KNEW would eventually fail and then BETTING AGAINST THEMSELVES!! of course, that only leads to the snake eating it's own tail because you can only get so many outside investors to 'cover' this type of loss so the system reached it's inevitable conclusion of no money going in and a fukcton of it going OUT... mostly to nowhere... so the system imploded.
YES, the way things were set up meant that everything would eventually crash anyway, but to deliberately ignore the insane amount of criminality, deceit and raping of the 'poor' by these 'Fat Cats' is unconscionable and the fact that NOBODY was held to account AND these fukcers got rich as hell doing it should make everyone impossibly angry.
Heads should roll....