The Republicans continue to spin the credit crisis as the fault of the poor and minorities. Yes, the global credit crisis had nothing to do at all with repackaging complex securities where Wall Street made trillions in a program that would be commonly known as a Ponzi scheme or Amway-like. Nope. Just because Wall Street profited and paid everyone millions in bonuses at each step of the sales (and repackaging) cycle, it doesn't mean they had any responsibility for the collapse.
It was all the fault of the poor and Bill Clinton who forced Wall Street to give loans to minorities. Forget about the vast difference in actual numbers between loans to poor and minorities compared to the complicated, risky rubbish sold throughout the world. No one understood what was inside those repackaged deals, but they didn't care because the money was good, until the collapse. In the minds of the GOP, it's always the fault of the poor. Period. For the reality-based world, the story is slightly different.
The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents.
"Expect fallout, expect foreclosures, expect horror stories," California mortgage lender Paris Welch wrote to U.S. regulators in January 2006, about one year before the housing implosion cost her a job.
Bowing to aggressive lobbying — along with assurances from banks that the troubled mortgages were OK — regulators delayed action for nearly one year. By the time new rules were released late in 2006, the toughest of the proposed provisions were gone and the meltdown was under way.
"These mortgages have been considered more safe and sound for portfolio lenders than many fixed rate mortgages," David Schneider, home loan president of Washington Mutual, told federal regulators in early 2006. Two years later, WaMu became the largest bank failure in U.S. history.
