Obama & the Policies That Led to the Economic Crisis of 2008

Obama & the Policies That Led to the Economic Crisis of 2008


Obama Litigated in Favor of Pressuring Banks to Make Risky Loans to Minorities

  • In 1993, attorney Barack Obama took a job as a litigator of employment and voting-rights cases with the law firm Davis, Miner, Barnhill & Galland. In a 1994 class action lawsuit known as Buycks-Roberson v. Citibank, Obama and his fellow Davis Miner lawyers represented ACORN in pressuring Citibank to make more mortgage loans to marginally qualified black applicants.
  • As author Jerome Corsi points out: “ACORN Housing, then a nationwide organization with offices in more than 30 cities, used the Citibank litigation to push the group’s radical agenda to get subprime homebuyers mortgages under the most favorable terms available.”
  • Four years later, a beleaguered Citibank—anxious to put an end to the incessant smears (charging racism) that Obama and his fellow litigators were hurling in its direction (to say nothing of its mounting legal bills)—settled the case by agreeing to increase its lending to minority applicants who failed to meet traditional loan criteria. Thus was a veneer of legal legitimacy given to the disastrous lending practices that eventually mushroomed into the subprime-mortgage debacle and, ultimately, the housing-market crisis of 2008—a crisis Obama blamed largely on the “greed” of Wall Street bankers and the excesses of free market capitalism.
  • Obama’s stance in favor of lending practices like those promoted in Buycks-Roberson were consistent with the dictates of the Community Reinvestment Act (CRA). Put in place by the Carteradministration in 1977 and reinforced aggressively by the Clintonadministration in the early 1990s, the CRA mandated that banks, in the spirit of “social justice,” make special efforts to seek out and lend to mortgage applicants—particularly nonwhite minorities—who failed to meet traditional loan criteria. As Forbes magazine points out, “Obama has been a staunch supporter of the CRA throughout his public life.”
  • Obama commonly takes issue with opponents who would prefer to permit the banking industry to function without a meddlesome federal government forcing it to engage in lending practices that defy common sense. He routinely accuses those adversaries of seeking to repeat “the same policies that got us into this mess in the first place.” But in fact, the policies that created the “mess” were precisely those government-imposed measures that Obama himself supported.

Seeking to Revive and Str
engthen the Community Reinvestment Act

  • Notwithstanding the economic calamity brought about by the CRA and similar policies, in the latter part of June 2009 the Obama administration sought to strengthen the CRA. Specifically, the administration laid out its position in a Treasury Department white paper titled “Financial Regulatory Reform: A New Foundation,” which called for the creation of a new super-regulator, the Consumer Financial Protection Agency, whose “core function” would be, among other things, to promote “rigorous application” of the CRA.
  • Along the same lines, Obama also supported the Community Reinvestment Modernization Act of 2009, which was introduced by Rep. Eddie Bernice Johnson (D-Texas) and 50 other co-sponsors (all Democrats). This bill called for expanding the CRA to include not just banks but also credit unions, insurance companies, and mortgage lenders.
  • In July 2011 it was reported that the Obama Justice Department was again pressuring banks to either increase the number of risky loans they made to minority applicants, or face charges of discrimination. Justice Department prosecutors had already wrested more than $20 million in set-asides from lending institutions fearful of being branded as racist for maintaining common-sense loan standards.
  • In April 2013 the Washington Post reaported that the Obama administration was pushing banks to make more loans to people with weak credit ratings; that Obama and his economic advisers had concluded that the “housing rebound” was “leaving too many people behind”—most notably, undercapitalized first-time homebuyers and nonwhite minorities with low credit scores. To remedy this situation, the administration instructed banks to rely less on the time-tested, race-neutral lending criteria that historically had served as reliable barometers of credit-worthiness—income, net worth, credit history, etc.   Instead, the administration said that banks should “use more subjective judgment in determining whether to offer a loan” because, as Obama’s Federal Housing Administration (FHA) commissioner put it, “there are lots of creditworthy borrowers … all the way down the credit-score spectrum.” And if this policy ultimately caused borrowers to default on their loans, “taxpayer-backed programs”—including those offered by the FHA—would pick up the tab.

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