The facts are undeniable; the U.S. economy is in a historically unprecedented crisis. All global economies are inextricably linked and the outlook is not hopeful on any front. There is no denying that economies undergo cyclical readjustments – periods of short and/or extended bull or bear markets. Some economists claim that recessions/depressions are unavoidable. However, was our economy precipitously manipulated to ensure failure? The following are the FACTS – you be the judge:

Please understand that I am by no means an economist, so bear with me on this somewhat lengthy, yet necessary explanation. If you try to stay informed, you have undoubtedly heard pundits on both sides arguing that the Community Reinvestment Act (CRA) of 1977, either had nothing to do with our current crisis or was the cause of everything we are currently experiencing. The truth (as always) is somewhere in the middle. The historical facts are that the Equal Credit Opportunity Act (ECOA) was enacted into law in 1974 and made it unlawful for any creditor to discriminate against any applicant with respect to any aspect of a credit transaction, on the basis of race, color, religion, national origin, sex, marital status, or age. This was a necessary law to ensure that credit equality was established on the basis of credit worthiness and not based upon the individual’s race or religion and was enforced with significant penalties and fines. The Community Reinvestment Act re-defined discrimination based upon location rather than the individual and mandated that financial institutions that receive FDIC insurance (the majority of banks) be evaluated on a quasi-quota ranking system to ensure entire communities were being adequately served. This law was not intended to fine these institutions, rather just to evaluate their performance, however by linking this law with the ECOA, significant penalties and fines could be imposed and a low CRA rating would impede a bank’s ability to operate. 

This law was enacted despite criticisms that the law would “distort credit markets, create unnecessary regulatory burdens, lead to unsound lending, and cause the governmental agencies charged with implementing the law to allocate credit”. Several laws already existed to ensure equality for the “underserved” communities, however these laws did not directly impact financial institutions, as did the CRA. 

In 1992 the Federal Housing Enterprises Financial Safety and Soundness Act required Freddie Mac and Fannie Mae (quasi-government agencies) to purchase and review “risky” mortgages to ensure a percentage (upwards of 50%) of their portfolios included low income housing.

Additionally, in 1995 the CRA regulations were changed significantly to streamline the process and ranking systems and allow community organizations and Political Action Committees (federal lobbyists) to use these ratings to apply pressure to financial institutions. The congressional hearings during 1995 yielded a litany of criticisms including overt political favoritism in allocating credit and politically motivated micromanagement by regulators. It was stated that banks should not be expected to operate at a loss to support high-risk loans. William Niskanen of the Cato Institute predicted that these CRA regulations would be very costly to the economy and the financial system. He recommended that Congress overturn the CRA. 

Between 1993 and 1998 the majority of large U.S. cities increased mortgage credit from CRA lenders to low and middle-income borrowers to $500 billion. In addition, the usually stoic and reserved Wall Street institutions were jumping on the federal guarantee bandwagon, 1997 saw First Union Capital and Bear, Stearns issuing a half billion dollars of CRA loan securities which were guaranteed by Freddie Mac and had an implied AAA credit rating.

By 1999 this juggernaut had achieved significant and seemingly unstoppable momentum. And in 1999 the Financial Services Modernization Act was passed into law and repealed a major provision of the Glass-Steagall Act, which had regulated banking practices since 1933. This in effect gave the CRA unlimited influence upon the banking industry which could now expand into the insurance, commodities and securities markets. By 2002 it was glaringly apparent to many economists, financial analysts and politicians that the train was traveling too fast and was going to derail. This derailment was not only going to take out the commuter trains, but all the other major rail lines as well. By 2006 it was too late and markets were showing signs of major structural damage. 

Hence we have arrived at where we are today… and the reason for the name of this article “High Crimes and Misdemeanors” which is from Article 2; Section 4 of the U.S. Constitution and states that: “The President, Vice President and all civil officers of the United States, shall be removed from office on impeachment for, and conviction of, treason, bribery, or other high crimes and misdemeanors.” 

This is an indictment on unchecked political corruption and influence peddling of an unprecedented scope and on a global scale. Check the facts…

In 1999 Senators Charles Schumer and Christopher Dodd forced the amendment to the Financial Services Modernization Act, which tied bank’s CRA performance to their ability to expand into the insurance and securities markets. This now put undue risk at the very heart of our financial institutions and created an omniscient mentality for Freddie Mac and Fannie Mae to guarantee subprime loans and high-risk mortgage-backed securities. We can only assume that this was a well intentioned, however disastrous mistake on the part of two high ranking Senators – not an impeachable offence, however a clear indication that these two should not hold any significant post. As we now know these two paragons of “virtue and intelligence” are now responsible for the financial future of our country. It gets worse…

In 2002 when all indications were that the U.S. economy was headed towards a catastrophic meltdown due in large part to the subprime mortgage-backed securities market, being driven by Freddie Mac and Fannie Mae, Representative Barney Frank and Senator Chuck Schumer assured the country and their constituents that Freddie Mac and Fannie Mae were “sound” financially, on the right track and that no crisis was looming. While lying to the public is bad enough, these imperious “geniuses” were influencing Fannie Mae and Freddie Mac, in closed-door sessions, to expand their scope and take on significantly greater risks. In 2006, Congressman Frank even went so far as to apply pressure to federal regulators to “ease-up on their restrictions and capital requirements” – a federal crime. By the way Congressman Barney Frank is the chairman of the House Banking Committee.

This leads us to 2008 and the collapse of the U.S. and global economies. By 2008 it was apparent that the damage to our economy was so significant that no single event or person could turn the tide. This would require a rapid and radical underpinning and a long-term plan to restructure the economy to re-establish financial stability and consumer confidence. Sensing that the inevitability of an economic collapse during a presidential election year was a death-knell to the incumbent party, our “honest and courageous” political representatives feared only one thing. LOSS OF POWER. They were not concerned with the fate of the citizenry, only that if the collapse occurred on the current administration’s watch the election would undoubtedly swing to the other party’s favor and what ever happened after the election could be blamed on the prior administration. Two scenarios had to be avoided at all costs – 1. That the current administration would miraculously implement a plan that would cause an upswing or correction in the economy, or 2. That the economic crisis would not hit until after the election. 

These are the High Crimes and Misdemeanors: 

Senator Chuck Schumer writes and publishes a letter to one of the largest banks in the country, Indy Mac and creates an unprecedented run on Indy Mac (over $1.3 billion withdrawn in under 3 days), which causes the second largest bank failure in U.S. history. This created a “domino” effect, which panicked the public and Wall Street investors alike and ensured the precipitous collapse of the economy. As if this wasn’t enough, Senate Majority Leader Harry Reid follows this up with the public statement that “a major insurance company” is on the verge of bankruptcy, which causes a massive stock sell-off and plummets all the insurance companies stocks into the basement. AIG (the largest insurance company) failed shortly there after. These were not random acts by the ignorant or uninformed, these were cold, hard, and calculated attacks on the U.S. economy by power hungry politicians that wanted this collapse to occur prior to the presidential elections. This is unconscionable and needs to be prosecuted to the fullest extent. These actions have done more damage to America than any perpetrated by criminal organizations, cartels or terrorists. The one BIG problem, the very same lunatics that facilitated this economic meltdown are now running the asylum.