RUSH: "Federal regulators for the first time are laying out rules," this is from the AP, "aimed at making sure that people who borrow money for mortgages can afford to repay them." Do you realize what this means? Do you realize what this means? "Federal regulators for the first time..." It's 2013! For the first time? This is a tantamount admission. Nobody's calling it this, except I, El Rushbo, except me.
I'm telling you: It's a tantamount admission that the subprime mortgage mess was exactly what it was. It was people who were given loans that could never pay 'em back, and they were not picked on. It was not predatory lenders that went out and found them. This was social engineering by Democrats. (summarized) "The American dream is everybody should have a house. It's not fair that certain Americans should have houses and other Americans don't."
So here came the subprime mortgage plan, and it basically was a federal program that ordered banks to lend money to people that had no way of paying it back, lend money to people that didn't have to take a credit test and pass it, lend money to people that everybody knew would never pay it back. By the way, if you're new to the program, I want to explain this again. Because the economic mess that we are in was caused and is the result of, predominantly, this.
There are a lot of factors, but the big thing that led to the '08 crash was the subprime mortgage market. If you're new to the program, I want to tell you what it was. There was a thing called the Community Reinvestment Act. It was originally proposed by Jimmy Carter, but it sort of languished after Carter proposed it. Bill Clinton in 1998 rejuvenated it, reignited it, as a means of distracting people from the Lewinski scandal.
It was a plan designed to help the downtrodden. Community Reinvestment Act was a plan designed to get people into houses who had no business being in houses 'cause they couldn't afford them. People that were never, ever gonna be able to pay back a loan were given loans. They were urged to go get loans. Now you might have heard predatory lenders in this and you might have heard that the banks were responsible, that the banks did this. The banks were under federal orders to do it.
Janet Reno, the attorney general for Clinton, threatened banks with investigations and punitive results if they didn't lend money to these people. That's where this started. During the Bush years, attempts were made to regulate this and fix it. And at every congressional hearing before the banking committee, when regulators were brought in to talk about solving it, the Democrats would swarm all over them and humiliate them and intimidate them and call them racists or whatever.
Because most of the beneficiaries in the subprime mortgage were minorities. Racial minorities. So, anyway, millions of people who could not afford bank loans were given them, and they went out and bought houses. This led to the utter crash of the housing market. People that couldn't afford houses were in them and not making payments. Therefore, the housing values plummeted. But the banks didn't just sit there and absorb the loss.
The banks, working with Fannie Mae and Freddie Mac, packaged these worthless mortgages into pools of worthless mortgages and called them mortgage-backed securities, and sold them -- under false premises, essentially. Just to pick a number for the purpose of illustration here, you pool a thousand mortgages together and you call it one mortgage-backed security. Then you go out and sell it. The eager buyer thinks he's got an income stream of a thousand people making monthly payments.
He's got worthless paper.
The banks foisted off worthless paper to people who didn't know what they were buying until they figured it out.
That bunch of people decided to repackage them as something else and sell them again, and all the while they were insured by Fannie Mae and Freddie Mac. Worthless paper, worthless loans that everybody knew were worthless kept being passed down to other investors until finally there were no more saps left to buy them and that's when the crash happened and that is the Cliffs Notes version of what happened. That's your subprime mortgage problem, right there. And it shoulda never happened. People that can't afford to pay back a loan should never get a loan. I don't care how discriminatory it sounds. I don't care how mean-spirited. It's not mean-spirited; it's common sense business.
But politicians wanted to be able to say that they were responsible for every American having a house, the American dream. So this is how they did it. People didn't pay the loans back because they couldn't. Many of these people were unemployed. Many of these people were on food stamps. They didn't have money to pay back a mortgage. So the banks packaged them, sell them to other unsuspecting buyers. The buyers end up realizing they bought something worthless, and they repackage it and sell it again. This keeps happening until the crash happened, and that was it. So now after all of that -- and that went on for ten years -- now after all of that, federal regulators for the first time are laying out rules aimed at ensuring that mortgage borrowers can afford to repay the loans.
The way I see this, this is a tantamount admission that what I just told you is in fact true. If these rules had been in place, say, in 1998, 1999, we would not have had the subprime mortgage crisis. We wouldn't have had the problem because the guidelines would have been in place to prevent people from getting these loans. So for the first time, folks, our wizards of smart in Washington, federal regulators, are now making rules aimed at making sure that people who get mortgages can repay the loan. A tantamount admission that such guidelines have never existed.
Now, I know what you're thinking, "But, Rush, but, Rush, every time I got a mortgage I had to prove --" yeah, but you weren't the target of the subprime program. None of you who could afford a mortgage were the problem. You had a mortgage or could afford it, you were in a house or not, but it was your choice. We're talking about people who had no prayer of ever being able to afford a house, not in their current circumstances. So now they're coming along and basically admitting that they lent money to people who couldn't pay it back. And so to make sure it never happens again, all of a sudden for the first time ever, for the first time.
Now, another thing that puzzles me about this, because we've gotten reports in recent years how the mortgage regulations have been fixed. I've seen these stories once a week for the last four years. But apparently all that was BS because now the federal regulators for the first time have laid out rules making sure that banks only lend to people who can afford it. The rules are being unveiled today by the Consumer Financial Protection Bureau. The rules "impose a range of obligations and restrictions on lenders, including bans on the risky 'interest-only' and 'no documentation' loans that helped inflate the housing bubble." Helped inflate it? They caused it!
So they're admitting here what caused the financial crisis. "Lenders will be required to verify and inspect borrowers' financial records." Now, I know you're saying, "Wait, I had to go through that every time I got a loan." Right, you have. Understand what this was. This was for people who never were going to be able to repay. They didn't have to go through it like you did. That's what the scam of the program was.
RUSH: Federal regulators for the first time are laying out rules aimed at making sure that people that borrow money for mortgages can afford to repay the loan. For the first time. For the first time. Again, I know you've had to go through this, you're thinking, "What do you mean, that rules have been in place? I've had to do this." Yes, so have I. Remember who this is aimed at. They're admitting what they did back in 1998. They gave money to people that couldn't pay it back. The banks were forced to do that.
Now, this story, it's an AP story, says the following: "Lenders will be required to verify and inspect borrowers' financial records." You know what Obama and the Reverend Jackson and the Democrats used to call that? Redlining. When the banks would look at people's financial records and determine whether or not they could pay 'em back, if they couldn't, they'd line 'em out in red, and they wouldn't get the loan. And of course the civil rights crowd yelled, "racist, racist, racist," because minorities were among the largest group not being given loans, and they said this wasn't because of their inability to pay. It's because people are racist at the banks. So they changed the rules and give 'em the money.
But Obama and the Reverend Jackson used to call these new regulations redlining. So look, we've closed the loop now. We're back to where we were before the problem happened, and in the process people here have unwittingly admitted what caused the financial crisis.
Gene in Colleyville, Texas. I'm glad you waited, sir. Great to have you on the program. Hello.
CALLER: It's great to be here. I was just gonna tell you, 50 years ago I started out in the banking business, and my uncle, who was a senior loan officer in a bank, said there's only three things you need to know to make a good loan. And the first one is, can he pay? In other words, has he got the income to cover the debt. The next one is, will he pay? His past credit history. And then the last thing is, if he doesn't pay, can I make him pay, which is collateral. He said, if you can answer those three questions "yes," you've got a good loan. If any one of those comes up "no," don't make the loan. And, by the way, he was a hard-core Democrat.
RUSH: Damn right, but that's what was blown up. That's what was thrown out. Those requirements were thrown out, and it didn't matter whether those three questions were met, the people were given the money to go out and buy houses. It's what I talked about earlier. This was just genuine stupidity. I don't care about good intentions in this case. They wanted to help everybody be in a house, but this is not how you do it. Look at what it caused. The laws of economics and mathematics are etched in stone, there for a reason. I appreciate the call.
RUSH: Pittsburgh, Maine, as we head back to the phones. It's Liz, and I'm glad to have you on the program. Hi.
CALLER: Hi, Rush. I'm calling in reference to something you were talking about in your first hour with the Community Reinvestment Act and the federal regulations forcing banks to make risky loans.
RUSH: Yeah. Let me repeat this just briefly for a second, because it was the first hour, and some welfare recipients have just probably gotten up in the last hour and are listening now. For the first time, federal regulators are writing regulations and laws telling lenders who they must lend to. Meaning people have to be able to prove they can pay back the loan. For the first time they're doing this. The interpretation is that this is tantamount an admission. "Federal regulators for the first time are laying out rules aimed at ensuring that mortgage borrowers can afford to repay the loans they take out." My point about this was I'm sure most of you have had to prove countless ways you can pay it back and you're saying, "Whoa, whoa, wait a minute, the rules already exist." Not for the people that we're talking about. The subprime people were never made to prove. In fact, there were people that everybody knew couldn't pay it back and they were given the loans anyway. So I wanted to set that up so people knew what you were talking about.
CALLER: Right. Well, I have a true anecdotal story. In the nineties under the Clinton years they were really ramming that through with forcing banks to make these loans, and my husband was the general counsel of a small regional bank in Virginia. The Feds came in and pulled three files that they had rejected for mortgages and were sort of putting them all out on a table and asking them "Why did you reject this?" and what not. The one loan, the woman stated her monthly income would be $15 more than what her mortgage payment would be, and the bankers kind of shrugged their shoulders and looked at the regulator, and said, "Well, that's why we rejected it." And the regulator, I quote, said, "You were making a lifestyle choice for her." And the bank was fined, and they were reprimanded in that they were not allowed to make a friendly merger for a period of I think about nine months --
RUSH: Folks, I hope you heard what she said, because this is exactly what was happening. The banks were being forced, therefore, to make loans to people that couldn't pay it back. The federal regulators were coming and threatening the banks. Janet Reno was threatening with further investigations. Here they were denied friendly mergers. They were forced to make the loan. The women said, "My take-home pay is 15 bucks a month more than the mortgage payment will be." The bank said it makes no sense for you to take that out. They made the bank loan the money anyway and then the feds that were making the lifestyle choice accused the bank of doing that.
CALLER: Right, right. And then when the whole meltdown happened in 2008, I knew immediately, the Wall Street Journal had been following this, and I knew immediately it was because of Democrat policies, and yet immediately George Bush and the Republicans were blamed for the meltdown. And I just think Romney --
RUSH: And the banks.
CALLER: -- should have made a bigger point of that in the campaign because every time Obama would say, "You don't want to go back to the policies that got us in this place --"
RUSH: You know why they didn't? I'm convinced that they didn't because they think it would be too complicated to explain, or there might have been some Republicans complicit with it. There were a lot of people that made a lot of money on this fraud.
CALLER: Yeah, but even Fannie Mae and Freddie Mac were staffed almost entirely by old, you know, Democrat husbands that were getting their payoff at the end of their careers.
RUSH: That's right. Franklin Raines, Jim Johnson and that crowd. I know, it really is maddening. I hope people heard what you said, because there's a real world example of what was happening.
RUSH: And it was frustrating. Immediately when the crash happened, they blame evil Wall Street banks --
CALLER: Bankers --
RUSH: -- and started accusing them of being predatory lenders --
RUSH: -- which meant that they were going out on the street dragging these people in and making 'em take the loans that they couldn't pay back. It was a massive set of lies that were being told.
CALLER: Right. It wasn't capitalism that failed. It was government intervention into capitalism that failed.
RUSH: Yeah, disguised as compassion --
CALLER: Right, right.
RUSH: -- allowing everybody to experience the American dream.
CALLER: Again, unintended consequences, which I think were in the past with liberals, but I think the Obama administration and things they're doing now are intended consequences.
RUSH: I do, too.
CALLER: I don't think it's any longer unintended.
RUSH: You're exactly right. I don't believe this unintended consequence stuff. There's nothing innocent about what these people are doing.
CALLER: No, no.
RUSH: It's like, do you remember the health care law? I have to remind people. The health care law is 2,700 pages. Now, that health care law, it was sitting in a draw. That health care law is a Democrat Party wet dream. That's been sitting in the drawer for years. Progressives over the years, congressional staff members wrote that health care law and put it in a drawer waiting for their moment of nirvana when they could introduce it. They didn't write that 2,700-page law from the time Obama started talking about it until it was passed. That thing had been sitting there. That was their prototype and had been written over years.
I'm telling you this because I want to remind you. Whatever Biden and Obama are cooking up with their little chat here on guns, I guarantee you, what they want to do with guns is somewhere in a document a wish list like the health care law was. Folks, they did not write the 2,700-page Obamacare law in two months. That law has been written over years, with input from a lot of people. Every Democrat constituency has a Christmas morning in that health care bill. And the same thing is happening with this gun control thing. So whatever Obama and Biden are cooking up, they're out there, "Well, we're talking, we're coming up with a solution." It's already written, years ago.
The Democrat Party has been salivating over the moment where they could come up with whatever technique they're gonna employ to get guns somehow drastically changed in this country. And it's already written. This is just a public show. They're trying to capitalize on the scant attention being paid by people. You have Sandy Hook. Everybody's emotional fever pitch is ratcheted way up, and they have created this impression that everybody's put their heads together now. We've finally reached a breaking point. It's enough. We've got to do something. And they're all huddling and they're coming up with some great plan. I'm telling you the plan has been in a drawer for years, like the health care law was. Don't doubt me. I know these people. I appreciate, Liz, the call.