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Paul Kiesel
Paul Kiesel
Contributor •

When it Comes to the Bailout, Some Refuse to See the Facts

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There are a lot of different news outlets and political blogs pointing fingers at who’s to blame for the financial crisis and why Americans should or should not support the failed bailout (or rescue) package.

The most recent argument being made by conservative journalists, on websites like Human Events, is that Democrats and the Community Reinvestment Act of 1977 are responsible for Wall Street’s problems and, accordingly, the $700 billion package. Republicans and Independents were innocent throughout all this, right? Even if Republicans had no hand in this problem (which is false, they did), wouldn’t they at least be guilty of negligence for allowing this to occur under their watch? They did control the House, Senate and the White House at one time for four years (2002-2006, and most of the period between 2001 and 2003). But that’s a hypothetical almost blameless situation for the GOP, as there are a lot of fingerprints on this mess that belong to key Republican members of Congress.

The Community Reinvestment Act (CRA) of 1977, contrary to the opinion of pundits on FoxNews.com and HumanEvents.com, is not at the foundation of current financial crisis. The CRA was a program designed to force banks to make loans in lower-income neighborhoods, but did not require the banks to make loans to lower-income individuals. There were parts of the Act that provided equal lending to credit worthy borrowers who were also low-income, and provided interest rate restrictions that would not later on in the life of the loan cause or come even close to equaling the economic hardship due to the sloppy subprime lending over the past six years. In fact, over half of the subprime lenders were independent, therefore, not subject to the regulation under the Community Reinvestment Act (which has been revised by Presidents Bush, Clinton and Bush II).

Observers need to understand that there are many parties that could be blamed and a laundry list of variables that have played a role in the mortgage meltdown. Truth in Lending violations were rampant. Mortgage fraud was at an all time high. Defrauding shareholders helped fuel the fire of new bad loans, too.

However, three key important legislative bills did play a direct role in the current meltdown: 1. Phil "We’re a Bunch of Whiners" Gramm’s Commodity Futures Modernization Act of 2000, which allowed for deregulation of the energy and lending industries, along with Gramm’s wife being able to collect almost $1 million as an Enron board member (before its collapse) 2. Gramm-Leach-Bliley Act of 1999 stripping a large part of the Glass-Steagall Act of 1933 (see link) 3. Newt Gingrich’s Home Ownership and Equity Protection Act of 1994, which was written to protect consumers against predatory loans, but it instead helped spark the subprime boom and, subsequently, even more predatory lending.

Overall, Congress needs to do what’s right and protect the rights of homeowners, those who are in good loans and those in bad loans (a countless number of these troubled loans are due to TILA violations, etc.), because if the latter is jilted on this bailout package and not represented like the executives on Wall Street, the number of foreclosures that WILL occur will adversely effect home values for everyone (which is less profitable for the government who will own these loans anyway; the loans should be reasonably modified so the government can recoup taxpayer money). There are many loans out there that are "avoidable foreclosures" and it would be irresponsible of the Treasury and members of Congress not to approve the rescue package that will be voted on Wednesday evening.