When asked last week by WJR morning radio host, Paul W. Smith whether there was blame to be laid for this “market meltdown”, Carl Levin could not help but place it on President Bush. He said that the “economic policies and deregulatory policies of this administration are the major cause of this economy being where it is at.” Either Mr. Levin is playing on the ignorance of the voters, or he has forgotten what role he himself played in this mess.
It All Started With the Community Reinvestment Act
Unless you just returned from a three-month fishing trip in Yellowknife where there are no radios, cell phones or Internet, you certainly know that the financial markets are in difficulty. It seems all these mortgages that so many folks obtained with little or no equity or credit rating, have suddenly crashed around all of us.
The genesis of this collapse is the Community Reinvestment Act (CRA) of 1977. This act which was championed by President Carter required lending institutions to offer credit and home ownership opportunities to “underserved populations.” This happened as a result of pressure from community organizers and groups like ACORN.
What it ultimately led to was a large number of no-money-down or poor-credit-rating mortgages. These mortgages were only moderately risky as long as housing prices continued to escalate. In 1995 under Bill Clinton, the CRA was liberalized to “generate billions of dollars in new lending and extend basic banking to the inner cities and to distressed rural communities.”
Now that the housing market is in full collapse, the chickens are, as they say, coming home to roost. Could this have been foreseen? Could this have been prevented? Of course. If all of us had exercised a little common sense added to a strong dose of personal responsibility, this would not have happened. Short of that, some solid regulation would have helped.
In fact, regulatory reform was proposed in the U.S. Senate in 2005. The bill, S.190 was introduced by Republican Senator Chuck Hagel and co-sponsored by Sens. Dole (R), Sununu (R), and McCain (R). It would have put some good controls in place to largely prevent the meltdown that is occurring today. The bill was supported by four Republicans and no Democrats. Where was Senator Levin on this? I cannot find any evidence of his support for the bill and, in fact, it was Democrats that effectively killed the bill out of committee.
President Bush had proposed a significant regulatory overhaul of the housing finance industry in 2003. It even included reducing the power of the administration. The New York Times reported on it. Democrats opposed it. Again, Carl Levin does not appear to have supported it. Congressman Barney Frank (D), said it was unnecessary. It never saw the light of day.
Going back a little further, a bill was introduced in 1999, S.900, which would have put some controls in place and, in effect, “weaken” the Community Reinvestment Act. Carl Levin opposed it saying this, “I oppose the provisions weakening the CRA included in S.900, a bill intended to modernize the financial sector of our economy.”
It certainly looks like Carl Levin and his Democrat (and some Republican) colleagues passed on numerous opportunities to address the crisis that was rising on the horizon as far back as 1994. Legislation was offered to reign in the problem. Senator Levin is certainly motivated to find answers now, but where was he in 1994, 1999, 2003, and 2005? It’s no wonder that in his interview with Paul W. Smith, he mentioned that we should not look back, but rather, look forward.