The origin of specious mortgages (updated)

By Thomas Lifson

The root of the current financial crisis is all those bad mortgages written to people who couldn't afford them. And why were so many bad loans made? Because the federal government pushed for it, in the name of expanding home ownership.

The brilliant editor of the Investor's Business Daily editorial page, Terry Jones, lays it all out clearly and concisely. This is must-reading. A sample:

While President Carter in 1977 signed the Community Reinvestment Act, which pushed Fannie and Freddie to aggressively lend to minority communities, it was Clinton who supercharged the process. After entering office in 1993, he extensively rewrote Fannie's and Freddie's rules.

In so doing, he turned the two quasi-private, mortgage-funding firms into a semi-nationalized monopoly that dispensed cash to markets, made loans to large Democratic voting blocs and handed favors, jobs and money to political allies. This potent mix led inevitably to corruption and the Fannie-Freddie collapse.

Despite warnings of trouble at Fannie and Freddie, in 1994 Clinton unveiled his National Homeownership Strategy, which broadened the CRA in ways Congress never intended.

Hat tip: Lucianne.com

Update from Dennis Sevakis:

In his editorial, Terry Jones at IBD referenced a 2000 article at City Journal but did not link to it.
That's the last link in this list of links from the home page of the City Journal

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