Take Me To Post Comment Form It is ironic that Barack Obama’s message of change stands to deliver a lot of the same stuff that has put us into the current economic situation we face. Obama recently announced his interest in expanding the opportunity for low and middle income borrowers to finance housing. His goal is to accomplish this in part through a program that guarantees a 30 year fixed rate mortgage for home buyers. The other half of the equation likely is served through a piece of legislation known as the Community Reinvestment Act.

Though Nancy Pelosi has identified the current economic debacle as one possessed by the Republican President George Bush, the claim to defame should in actuality be to the dishonor of the Democratic Party. The CRA was a tool developed under the Carter administration. The CRA was enacted by Congress in 1977 (12 U.S.C. 2901) and implemented by Regulations 12 CFR parts 25, 228, 345, and 563e. It was intended to encourage depository institutions to help meet the credit needs of the communities in which they operate.

The act was strengthened under the Clinton administration in 1995 and the new power in the act was credited with substantially increasing the number and aggregate amount of loans to small businesses and to low- and moderate-income borrowers for home loans.
Part of the increase in home loans was due to increased efficiency and the genesis of lenders, like Countrywide, that do not mitigate loan risk with savings deposits as do traditional banks using the new subprime authorization. This is known as the secondary market for mortgage loans. The revisions allowed the securitization of CRA loans containing subprime mortgages. The number of CRA mortgage loans increased by 39 percent between 1993 and 1998, while other loans increased by only 17 percent.

Incidentally, it was none other than the Bush administration in 2003 that called for far reaching regulatory overhaul in the housing finance industry. This change was to move governmental supervision of two of the primary agents guaranteeing subprime loans, Fannie Mae and Freddie Mac under a new agency created within the Department of the Treasury. The changes were generally opposed along Party lines and eventually failed to happen. In his infinite wisdom, Representative Barney Frank(D-MA) claimed of the thrifts "These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." Representative Mel Watt (D-NC) added "I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing."

The only truth is that there really is no change to be offered through an Obama administration. It is simply a shifting of philosophies. Those who recognize the mistakes of the past and fail to move from them are the epitome of insanity defined: doing the same thing, and expecting different results.