During the 1990s, former Clinton aides bragged that more aggressive enforcement of the Community Reinvestment Act pressured banks to issue riskier mortgages, lending more proof the anti-redlining law fueled the crisis. …
Clinton’s changes to the CRA let ACORN use the act’s ratings to “target merging firms with less-than-stellar records and to get the banks to agree to greater community investment as a condition of regulatory approval for the merger,” White House aide Ellen Seidman wrote in 1997 to Clinton chief economist Gene Sperling.
“Community groups have come to recognize how terribly powerful CRA has been as a tool for making credit available in previously underserved communities,” Seidman added.
Seidman later boasted that Clinton’s 1995 CRA revisions created not only the subprime mortgage market but also the subprime securities market. Of course, subprime loans and their high default rates ruined minority neighborhoods when the market crashed.
Memos also reveal how Clinton aides held repeal of the Glass-Steagall Act hostage to strengthening the CRA. They gave Republicans deregulation of banking activities in exchange for over-regulating how those banking activities applied to low-income communities.