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History of Subprime Morgage Crisis

Clinton, Obama and the Subprime Mortgage Crisis

Sep 27, 2012

Ironically, Barack Obama led the effort that caused the mess that needs cleaning up. Barack Obama was a pioneering contributor to the national subprime real estate bubble—the attack dog that terrorized banks to make mortgage loans that they did not want to make. According to research by TheDailyCaller, about half of the 186 African-American clients in President Obama’s landmark 1995 mortgage discrimination lawsuit against Citibank have since gone bankrupt or received foreclosure notices. As few as 19 of those 186 clients still own homes with clean credit ratings, following a decade in which Obama and other progressives pushed banks to provide “booby trap” adjustable rate mortgages to poor African Americans.

The origins of our current Great Recession began neither with the Obama Administration, nor the Bush Administration, but with the Clinton Administration. In June 1995 President Clinton introduced his National Homeownership Strategy, which included the expansion of Credit Default Swaps (CDSs). President Clinton, Vice President Gore and Secretary Cisneros announced the administration’s comprehensive new strategy for raising home-ownership in America to an all-time high. Representatives from ACORN were guests of honor at the ceremony. In his remarks, Clinton emphasized that: “Our homeownership strategy will not cost the taxpayers one extra cent. It will not require legislation.” Clinton meant that informal partnerships between Fannie and Freddie and groups like ACORN would make mortgages available to customers “who have historically been excluded from homeownership.”

When President Clinton introduced his National Homeownership Strategy in June 1995, no one realized it would create the path of doom that would have such a long-term devastating effect on the economy, particularly for millions of Americas who experienced foreclosure. The volume of foreclosures, and foreclosure trends, are telling and underappreciated economic indicators for the American economy. Foreclosures accelerated as the Housing Price Bubble began to form in 1997. Based on Realty Trac, Federal Reserve, Equifax sources, in the last year of the Clinton Administration foreclosures were already on the rise even though the economy was expanding (470,000 foreclosures in 2000). The legacy of the National Homeownership Strategy would be millions of foreclosures during the Bush and then Obama Administrations.

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