Is Bill Clinton & the Democratic Party Responsible for the Current Economic Crisis?

President Bush's Vision of "The Ownership Society" & the GOP's Demands for Deregulation Are the Real Culprits

The right-wing meme machine has been promulgating the idea that President Bill Clinton and the Congressional Democratic Party are the true culprits in the current economic crisis. According to Wikipedia, "A meme consists of any idea or behavior that can pass from one person to another by learning or imitation. Examples include thoughts, ideas, theories, gestures, practices, fashions, habits, songs, and dances. Memes propagate themselves and can move through the cultural sociosphere in a manner similar to the contagious behavior of a virus."

The right-wing meme machine is claiming that the crisis is the result of Democratic efforts to expand homeownership among minorities and the white "lower middle-class" by expanding the market for risky sub-prime mortgages. Once holders of sub-prime mortgages began defaulting, the income stream that backed up the $55 trillion in financial derivatives that had been underwrriten with the mortgages dried up, triggering the financial crisis.

Many sub-prime mortgages were adjustable rate mortgages (ARMs), once known as balloon notes. (They were called balloon notes when this questionable practice was confined to minority communities.) A balloon note has easy terms in the early part of the loan, but eventually, the note resets, and the holder has to make a massive payment ("the balloon" having risen) to retain their property.

Other types of ARMs have low initial payments and/or interest rates, but reset after 2-5 years, and the mortgage holder has to meet a much higher payment. If they can't meet the payment, they will go into default.

Balloon notes used to be the province of predatory lenders, such as those serving the minority communities. They were very prevalent among lenders serving African American communities in the south. The idea is, from the lender's point of view, the balloon note holder is not going to be able to make that big payment when it comes due, as he or she will not be able to have bettered themselves financially in the meantime, due to discrimination. The lender then repossesses the property, finds another pidgeon, and the process begins again.