Responding to Robert Reich’s: Why Atheist Libertarians Are Part of America’s 1 Percent Problem
“But then came the period of Reagan’s holy trinity: privatization, deregulation and free trade. Now here we are today, facing the largest economic crisis since the 1930s.”
Reich writes as though he never heard of the Freddie Mac and Fannie Mae, and the Community Reinvestment Act. Let me refresh his memory. The act forced banks that wanted to expand their operation to lend to what was termed the subprime market, which consisted of mostly blacks and Hispanics who did not have neither the credit history nor the ability to pay the banks back the loan they took out to buy their houses. A lot of theses subprime loans were balloon loans which had to be refinanced at the end of a certain time, 5 years I think, at whatever the prevailing interest rate was to be at the time of refinancing.
Well when the holder’s of the subprime mortgages started defaulting the income derive from the mortgages started drying up, income derived from the prime mortgages was still flowing, but the derivatives no longer the value it had once had, and many banks had to call in loans to meet their reserve requirements, and did not have the funds you make new loans. See, the way it worked is that the banks would make the mortgages, Freddie and Fannie would then buy them from the banks giving them more money to make new loans with, they would in return sell their derivatives to the world so they could buy more mortgages from the banks.
It was a house of cards built upon the ability of people who had never been able to get a good credit rating, regardless of the cause, and when they started reneging on their part the house fell down dragging us into this “…largest economic crisis since the 1930s.” It was most definitely not a, “Abject Failure of Reaganomics”, it was most definitely an abject failure of Progressive economics. One which they want us to believe was Reagon fault, at least he did not blame Bush.