The latest example of Attorney General Eric Holder’s bank extortion is the case of Bank of America, where he and his big government thugs are using taxpayer money to require the bank to pay billions of dollars for doing what the government told them to do.
A must-read editorial at IBD explains that Bank of America is being forced to provide “billions in debt forgiveness payments” and even worse, “to make billions in new loans, while also building affordable low-income rental housing…” in many cities across America. Additionally,
Buried in the fine print of the deal…are a raft of political payoffs to Obama constituency groups.
Shockingly, the groups that plan to benefit are “the same parasites that bled them for the risky loans that caused the mortgage crisis,” such as ACORN spin-off Mutual Housing Association of New York, or MHANY.
The financial crisis was the direct result of government policies that forcibly pressured banks to approve bad mortgage loans or be deemed “racist.” Academia, the federal government, and activist organizations pushed, pushed, pushed, pushed banks to make bad loans.
As Stan Liebowitz observed at the New York Post in 2008,
Pushed hard by politicians and community activists, the regulators systematically and deliberately altered financially sound lending practices.
William Coy of Businessweek wrote in 2008 the Clinton Administration “went to ridiculous lengths to increase the national homeownership rate.” Coy revealed that Bill Clinton
…promoted paper-thin down payments and pushed for ways to get lenders to give mortgage loans to first-time buyers with shaky financing and incomes.
President George W. Bush continued the pressure. He lamented that “[T]wo thirds of all Americans own their homes, yet we have a problem here in America because fewer than half of the Hispanics and half of the African Americans own their home. That’s a homeownership gap.”
President Obama, believe it or not, also played a role before he was even a Senator. A little reported but important article by the incomparable Neil Munro clearly illustrates how Obama was, in fact, “a pioneering contributor to the national sub prime real estate bubble,” as his actions helped lead America to the circumstances that led to the 2008 recession.
But the government, who allowed their activist cronies to lead the way, are not at fault. Why? Because they are simply following in what the founding fathers referred to as the “nature of government.” As Thomas Jefferson warned, “[T]he government that governs least governs best.”
So, despite the fact that the demands from the activist government were – and are – ridiculous, the banks went along, presumably for fear of being accused of discriminatory practices, coupled with greed – knowing these awful loans were backed by the United States taxpayer. Instead of standing firm to tried-and-true worthiness standards for would-be homeowners, banks caved. Many banks, knowing that the taxpayer would foot the bill for bad loans, used the degraded standards to their advantage – offering loans to anyone who wanted one and raking in the money.
In going along, they accepted the false premise (oh but they tried so hard to prove non-existent racism) that they were discriminating against black Americans and Hispanics.
Consider Angelo R. Mozilo, former Chairman, President and Chief Executive Officer, Countrywide Financial Corporation. He toed the line, he even gave a presentation in 2003 at the Joint Center for Housing Studies of Harvard University where he lamented discrimination in mortgage lending and as Eric Englund observed in 2008, for Mozilo,
…social engineering demanded that sound credit-underwriting principles be abandoned.
Mozilo has become a villain, even though he did everything the progressives told him to do. England wrote wryly,
Countrywide Financial Corporation’s failure stands as a monument as to how integrating egalitarianism and political correctness, into a business plan, is downright poisonous.
Rolling Stone, like many others, removed all accountability from the federal government and languished Mozilo’s “ill-gotten gains,” declaring,
Mozilo…represented the conscious decision of mortgage underwriters to abandon lending standards in order to claim ever-larger chunks of market share.
The dam broke in 2000, when former HUD [Department of Housing and Urban Development] Secretary Andrew Cuomo “required Fannie Mae and Freddie Mac to purchase subprime, CRA and other risky mortgages totaling half their portfolios,” as reported earlier this year at IBD.
In 2010, the New York Times, along with progressives everywhere, took the government out of the equation as they gnash their teeth about the “predatory loans” (that the government created).
It was during his [Cuomo’s] tenure that the banking industry began to embrace predatory loans, and these creations led to a housing bubble that badly damaged America’s banks and nearly toppled its financial system.
In fact, the NYT praised Andrew Cuomo, saying that he was “quick to warn about Wall Street’s dangerous hunger for predatory subprime loans…” The only reason he “pushed the government-sponsored banks, Fannie Mae and Freddie Mac, to buy more home loans taken out by poor and working-class borrowers,” they reason, was “to reverse decades of discrimination against blacks and Latinos…” As Coy observed,
It’s clear now that the erosion of lending standards pushed prices up by increasing demand, and later led to waves of defaults by people who never should have bought a home in the first place.
The shoddy practices pushed by the government and their activist cronies, coupled with those shoddy practices being embraced by big banks who knew better, are wholly responsible for the global financial crisis.
In sum, the government pressured the banks to make crappy loans, the banks complied, knowing that the taxpayer would foot the bill for loans that foreseeably went into default. The American taxpayer footed the bill, and now the US government is conveniently forgetting their own massive role in this disgusting mess, opting instead to extort even more money from the banks for doing exactly what they were told to do.