Don't blame Ron Paul, who is a mere member of the U.S. House of Representatives with as much chance of being the next GOP presidential nominee as you or I have. Better to call out Charles Krauthammer, Rush Limbaugh, the Wall Street Journal editorial page, and the other influential conservative Republicans who don't want to acknowledge the role of Wall Street in precipitating the Great Recession.
But it was Paul who on Monday said (beginning at approximately 1:00 of video, part 2) on Jon Stewart's The Daily Show federal regulators "had a big bubble and they made a lot of money because we wanted to make sure that everybody had a house."
Uh, no. In September, 2008 Aaron Pressman explained
The Community Reinvestment Act, passed in 1977, requires banks to lend in the low-income neighborhoods where they take deposits. Just the idea that a lending crisis created from 2004 to 2007 was caused by a 1977 law is silly. But it’s even more ridiculous when you consider that most subprime loans were made by firms that aren’t subject to the CRA. University of Michigan law professor Michael Barr testified back in February before the House Committee on Financial Servicesthat 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations. As former Fed Governor Ned Gramlich said in an August, 2007, speech shortly before he passed away: “In the subprime market where we badly need supervision, a majority of loans are made with very little supervision. It is like a city with a murder law, but no cops on the beat.”
Not surprisingly given the higher degree of supervision, loans made under the CRA program were made in a more responsible way than other subprime loans. CRA loans carried lower rates than other subprime loans and were less likely to end up securitized into the mortgage-backed securities that have caused so many losses, according to a recent study by the law firm Traiger & Hinckley (PDF file here).
Finally, keep in mind that the Bush administration has been weakening CRA enforcement and the law’s reach since the day it took office. The CRA was at its strongest in the 1990s, under the Clinton administration, a period when subprime loans performed quite well. It was only after the Bush administration cut back on CRA enforcement that problems arose, a timing issue which should stop those blaming the law dead in their tracks. The Federal Reserve, too, did nothing but encourage the wild west of lending in recent years. It wasn’t until the middle of 2007 that the Fed decided it was time to crack down on abusive pratices in the subprime lending market. Oops.
Many Republicans complain that President Obama and other Democrats blame George W. Bush for everything. It is, of course, easy to do because Americans are more prone to attribute the economic crisis to President Bush than to President Obama. But that probably wouldn't be the case if the GOP (with little pushback from the Democratic Party and less from the mainstream media) hadn't built a wall around corporate America, shielding it from blame while fingering the federal government. Somebody was responsible. It was primarily the titans of Wall Street- but if the GOP wishes to absolve any part of their base (corporate, ultimately) of responsibility, the American people will blame a President. In their wisdom, more have chosen GWB than BHO.
| The Daily Show With Jon Stewart | Mon - Thurs 11p / 10c | |||
| Ron Paul Pt. 1 | ||||
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| The Daily Show With Jon Stewart | Mon - Thurs 11p / 10c | |||
| Ron Paul Pt. 2 | ||||
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