In 1977 President Jimmy Carter signed into law the Community Reinvestment Act which pushed Fannie and Freddie to aggressively seek loan for minorities. In 1993 President Clinton rewrote the rules for Fannie and Freddie. When these rules were re-written Fannie and Freddie went from quasi-private firms into semi-nationalized ones that monopolized the mortgage industry. The Democratic controlled congress made loans to large Democratic voting blocs that handed out the money for favors and jobs.
In 1995 President Clinton had the Treasury Department to rewrite the rules for the Community Reinvestment Act and banks were given strict new numerical quotas and measures for the level of diversity in their loan portfolios. Banks then sought after a good CRA rating which made them more attractive for a takeover or a merger.
Between 1997 and 2001 Andrew Cuomo, Clinton's Secretary of Housing, made a series of decisions that allowed Fannie and Freddie to leverage capital to just 2.5% versus 10% for banks. They were also allowed to get into the subprime market. Under the new guidelines Fannie and Freddie exploded and with their incentives banks made billions of dollars of loans in less fortunate areas which boosted minority home ownership but lead to many of these loans going bad.
We are now at the same crossroads where our financial mess started 30 years ago. That was the last time that we had all three branches of our government controlled by the Democrats. The legacy of the very left Carter administration was the loss of our staunchest ally in the Middle East (Iran) which was replaced with a devout enemy and a financial crises not experienced since the Great Depression and is directly related to decisions they made for Freddie and Fannie and then were further promoted by the Clinton Administration.
