September 25th, 2008, Fairfax, VA—Americans for Limited Government President Bill Wilson today called upon Congressional leaders in a letter not to help people stay in homes they could never afford in the first place, and who would have never qualified for loans if the government had not encouraged loose lending.
The letter was addressed to House Speaker Nancy Pelosi (D-CA), House Republican Leader John Boehner (R-OH), Senate Majority Leader Harry Reid (D-NV), Senate Minority Leader Mitch McConnell (R-KY), Senator Barack Obama (D-IL), and Senator John McCain (R-AZ).
“The tens of millions of American families who have played by the rules and paid their bills must not be forced to bear the burden for reckless decisions made by the government,” wrote Wilson in his letter.
In a statement, Wilson laid the blame for loose lending at the government’s feet. “Thanks to the federal government artificially setting low interest rates and using the so-called Government Sponsored Enterprises Fannie Mae and Freddie Mac as a housing welfare program, the bad loans made now threaten the greater economy.”
Wilson explained in more detail, “The government encouraged risky loans to low-income individuals via laws like the Community Reinvestment Act, plus with Clinton administration regulations of 1995 overseen by then-HUD Director Andrew Cuomo that made Fannie and Freddie the leaders in the subprime mortgage market.”
“Once the government decided via the GSEs that savings were unnecessary for potential borrowers, lending institutions nationwide followed suit,” said Wilson. “This laid the seeds for financial catastrophe. Government in its money-lending capacity sets the tone for how financial markets operate.”
As a result, Wilson believes that the Community Reinvestment Act and the 1995 regulations must be permanently repealed. According to the letter, “The government should not be encouraging loose credit to help low-income individuals to purchase homes. Instead, it must encourage honest credit so that there is not a repeat of the current mistakes. Only then will the true market demand for housing be known. The loose lending practices, and housing welfare programs administered by federal regulations and laws must be repealed.”
According to the letter, the federal government has already spent approximately $763 billion this year to stave off the current financial crisis. “You are now being asked to allocate an additional $700 billion from the American taxpayer to prevent a crisis that may be unpreventable. If it fails, the government will have wasted nearly $1.5 trillion of taxpayer funds to stop something that was going to happen anyway,” wrote Wilson.
In his statement, Wilson implored Congress not to repeat the same mistakes again: “The root cause of this problem was the government-created loose lending standards. If Congress should address anything, it should be to put an end, once and for all, to the ACORN-inspired housing welfare program that has pulled the nation’s economy into the most turbulent waters it has seen since the Great Depression.”
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