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Opinion >  Letters

Real cause of the recession

The recent article by Phil Angelidies blaming Wall Street for the 2008 Recession is incorrect (“Wall Street never learned its lesson,” Sept. 16, 2018). Wall Street bankers were not the cause, they merely reacted to the situation.

The cause goes back as far as the Carter administration when Democrats in Congress passed the Community Reinvestment Act. This gave government regulators the power to punish banks that failed to meet the credit needs of low-income, minority and distressed neighborhoods.

Congressman Barney Frank and Senator Chris Dodd led this charge, promising to punish lenders who did not make loans to people with poor or no credit history. Freddie Mac and Fannie Mae, the two government-chartered mortgage firms, authorized ever more flexible criteria by which high-risk borrowers could qualify for loans. Lenders were directed to accept welfare payments and unemployment benefits as valid income sources to qualify for a mortgage and failure to comply could lead to a lawsuit.

In contrast the Bush administration proposed much tighter regulation of the two entities, but Frank fought them, complaining that the administration was more concerned about financial safety than housing.

Democrats were the real authors of this disaster, and the author, also a Democrat certainly knows it.

Hal Dixon

Spokane


 

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