(Remember the definition of insanity: Doing the same thing over and over again but expecting the results to be different this time.)
...[F]ew people noticed a hearing with an exceedingly boring title -- "Proposals to Enhance the Community Reinvestment Act" -- held last week in the House Financial Services Committee. But the session marked a key moment in the ongoing battle between Republicans and Democrats over what caused our current financial woes -- and how we might best avoid getting into the same trouble again.The same legislation that forced banks to lend to borrowers incapable of repaying the loans is now being 'enhanced' to force banks to do even more of this kind of lending? If that isn't an example of fiscal insanity, I don't know what is.
At the hearing, and in others across Capitol Hill, Democratic majorities are pressing hard to expand some of the very policies that led to the reckless home lending that in turn helped lead to the great financial meltdown. If Chairman Barney Frank and his fellow Democrats have their way, we'll do it all again -- and more.
At issue last week was H.R. 1479, the Community Reinvestment Modernization Act of 2009, sponsored by Democratic Rep. Eddie Bernice Johnson. It would expand and strengthen the 1977 Community Reinvestment Act, which required banks to make loans in low-income areas that many lenders had traditionally shunned.
Back in 2003 and again in 2007, President Bush tried to rein in Fannie Mae and Freddie Mac, two government-created financial organizations, because he believed they were getting in over their heads. Barney Frank, the same Chairman of the House Financial Services Committee, blocked any attempts to do that, stating on more than one occasion that they were fiscally sound and required no such efforts.
He was wrong.
Both Fannie Mae and Freddie Mac backed the irresponsible loans the banks were forced to make by taking them off the bank's hands and repackaging them, in effect collecting most of the risky home loans and holding on to them or repackaging them as mortgage backed securities. When these home loans stopped performing, as they were destined to do, both financial organizations failed and billions of dollars were lost in the financial markets and billions of dollars worth of real estate was foreclosed upon, leaving the taxpayers holding the bag.
Now these congressional idiots want to the same thing...again.
Do they really believe that this time there won't be a housing market collapse when banks are forced to give even more home loans to people incapable of paying them back?