Recession: Plenty of blame to go around

It was refreshing to read the letter stating the real and accurate history of the Community Reinvestment Act signed into law by President Bill Clinton ["Republicans are protecting citizens," June 3].

It is not widely known that under the premise that everyone has the "right" to own a home, banks where mandated to take on these high-risk mortgages. These subprime loans were given without credit, background and income checks, and without a down payment. How could anyone not know these mortgages were doomed to certain default?

The letter writer is also correct that this law planted the seeds of the recession that we are still trying without much success to recover from. I would add that this is a lesson and an example of what happens when so-called rights are invented for political pandering.

We are experiencing more of the same with budget deficits and Medicare problems. Let us not fall prey to political stunts. If we do, we risk national default and the demise of Medicare.

Robert DiNubila, Franklin Square
 

If the letter writer is correct ["Lending practices caused the crash," June 5], and the poor banks were forced to issue mortgages that they knew would fail, then they knowingly committed fraud by packing those mortgages into securities and selling them as valuable commodities. They did indeed commit that fraud, but it was the invention of mortgage-backed securities themselves that was the cause of the crash. Before that, a lending institution was careful about loans because it would collect the interest on the loan and be liable if the loan was not paid off.

Once mortgages became just a commodity, then the race was on to originate as many as possible and make the instant money on the fees, rather than wait for the interest money to trickle in. There was no incentive to verify that the loan made sense, because that became someone else's problem. All it took to keep the scam going was to have the ratings agencies verify the false value of the securities. That was simple because of the cozy relationship between the banks and the ratings agencies, and they simply took the banks' word for the value.

We need greater oversight of the banking and insurance industries because we have seen time and again that the greed of the already wealthy is apparently bottomless.

David Kulick, Flushing