by J. Gean

Created on: January 28, 2010

Did Banks Really Cause the Mortgage Crisis?

Tonight, in his State of the Union Address, President Obama blamed banks for the sub-prime mortgage crisis and current economic conditions.  He said banks that could afford to pay their executives huge bonuses could afford to pay back the American taxpayers who bailed them out.

Many banks who reluctantly received TARP money have already repaid the government (1).  When some banks tried to repay the TARP money, Obama’s administration would not accept it.  They wanted control of the banks and the bailout was a way to gain control(2).  The banks wanted no part of it, so they paid the money back as soon as they could.

But why does Obama insist that the financial crisis is the fault of banks?  Is he perhaps developing Alzheimer’s disease?  Is he losing his memory?  Does he even remember events that took place in recent history, specifically during Bill Clinton’s administration?

Well, since certain government leaders seem to be experiencing chronic amnesia, let’s go back to Clintons time and refresh our memories of at least one of his accomplishments. A quick and simple Google search for the terms “Clinton Affordable Housing” will reveal the beginning of the disaster we all face today.

An article posted on openmarket.org quotes the DC Examiner as saying “The current mortgage crisis came about in large part because of Clinton-era government pressure on lenders to make risky loans in order to more affordable for lower-income Americans and those with a poor credit history”(3).   Another headline, posted on BusinessWeek.com, reads “Bill Clinton’s Drive to Increase Homeownership Went Way Too Far”(4).

Bill Clinton directed Henry Cisneros, his HUD secretary, to derive a plan for affordable housing. The plan they came up with was called “The National Homeownership Strategy: Partners in the American Dream”. One paragraph from the plan reads as follows:

“For many potential homebuyers, the lack of cash available to accumulate the required down payment and closing costs is the major impediment to purchasing a home. Other households do not have sufficient available income to make the monthly payments on mortgages financed at market interest rates for standard loan terms. Financing strategies, fueled by the creativity and resources of the private and public sectors, should address both of these financial

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