President Barack Obama’s main economic argument for his re-election is that “we can’t go back to the failed policies of the Bush administration.” The housing market collapse actually caused the economic crisis of 2008, so what caused the collapse? Thomas Sowell’s book, “The Housing Boom and Bust,” exposes the real failed policies and those Democrats who made and enforced them.
The main policy that began this tragedy was the Community Reinvestment Act (CRA) of 1977. It gave executive branch agencies the authority to “encourage” financial institutions (banks) to “meet the credit needs of local communities. …”
Application of the CRA languished through two Republican presidencies, but the Clinton administration adopted the mantra of “affordable housing,” imposing and enforcing mortgage-lending quotas on banks based on racial equality numbers. New regulations required “innovative or flexible” lending practices to achieve these goals. This spawned sub-prime mortgages, allowing people with inadequate finances to get in over their heads. ACORN assisted them through activist lawyers like Barack Obama.
The Bush administration sought new powers to restrain these practices, but Senate Democrats threatened filibusters, stopping them. Now Democrats hypocritically condemn the banks for doing what Democrats forced them to do.