America in Crisis: The Financial Bailout Plan

Whether you feel that the bailout is needed or not I am sure you all agree that any emergency legislation should not include entitlements. At least I hope you agree after reading this article.

This crisis has been brewing for decades. Part of the cause started in the 70's with the Carter administration with the Community Reinvestment Act (CRA). This act was well intentioned and properly implemented provided assistance to those in need of better housing. Unfortunately, in 1995 during the Clinton administration the CRA was expanded to allow larger and more housing and small business loans to low and moderate income families. What would seem to be a good idea created and new type of loan now called a subprime loan. Even at this point, the CRA could still have been a valuable resource for lower income Americans without creating a financial crisis in America.

With a green light from Congress and nearly free money from the Federal Reserve, subprime lending practices starting getting out of control over the next eight years. An obvious housing bubble was growing. In 2003, Bush, requested legislation to regulate subprime loan guarantees by Freddie Mac and Fannie Mae. That legislation never made it even with a Republican controlled Congress. Here is a statement by Sen. Barney Frank on the proposed regulation, "These two entities-Fannie Mae and Freddie Mac-are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."