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Title: Blog by Novelist William S. Frankl, MD

Who’s to Blame?

In the present financial crisis we’re in, there’s been a great deal of finger-pointing about who was responsible for the mess. It’s necessary to set the record straight. The mess began in 1977, when the Carter administration and the Democrat Congress developed the Community Reinvestment Act (CRA), which mandated that all banks meet the credit needs of their entire community. The CRA was developed in order to open the mortgage market for individuals with low incomes. Thus, the CRA lay the groundwork for the subprime mortgage debacle. In 1995, the Clinton administration imposed strong regulations and performance tests that coerced banks to increase their loans to low income poverty area borrowers or face fines or possible restrictions on expansion. This allowed securitzation of CRA loans containing subprime mortgages. Fannie Mae and Freddie Mac were also created to handle these mortgages. They became multi-billion dollar creatures of the Congress, a hybrid institution, both private and public. They mishandled billions of dollars of loans, utilized suspect accounting practices, and were protected from significant oversight by Rep. Barney Frank(D) of Massachusetts and Senator Christopher Dodd (D) of Connecticut, both of whom received huge sums of money for their campaigns from Fannie and Freddie. In 2004 and 2005, when President Bush, Senator McCain, and Fed Chairman Greenspan attempted to impose tight regulations on Fannie Mae and Freddie Mac, they were stonewalled by the Democrats in Congress, including Frank and Dodd. I might add that Johnson and Raines, the disgraced CEO’S of Freddie and Fannie respectively, are major financial advisers to Senator Obama, who also recived large campaign gifts from these institutions. So who’s to blame? You tell me.

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