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Subprime Bill Clinton and the recession
Former President Bill Clinton was at the University of New Hampshire on Wednesday to campaign for President Obama. UNH students convinced by the Obama campaign and its surrogates that the Bush administration “got us into this mess,” as they like to say, might review a little history.
Several studies have shown that the bulk of the decline in household wealth in the past decade came from the housing crash. Obama blames the crash on Republicans. But in 1995, the Clinton administration gave Fannie Mae and Freddie Mac incentives to buy up subprime loans. In 1999, under Clinton, Fannie Mae relaxed its loan standards significantly, prompting this New York Times warning: “In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.”
That is exactly what happened. It wasn’t all Clinton’s doing. Congress pushed subprime lending too, as did the Bush administration. Financial institutions increased their risky lending, knowing that the government-sponsored enterprises would take on some of the risk.
The recession was caused in part by Washington playing politics with lending standards. And Bill Clinton played a big role. Sorry to spoil the rally, but those are the facts.
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