Sean Hannity baselessly asserted that "[t]he federal government and the Democrats ... forced these banks, through the Community Reinvestment Act, to make these risky loans," adding, "The risky loans started the subprime mortgage crisis, which impacted all these financial institutions, which needed government bailouts." In fact, according to housing experts, the vast majority of subprime loans were made by independent lenders not covered by the CRA.
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On the November 24 edition of Fox News' Hannity & Colmes, co-host Sean Hannity claimed that federal regulations are responsible for the current economic crisis, baselessly asserting that "[t]he federal government and the Democrats ... forced these banks, through the Community Reinvestment Act, to make these risky loans," adding, "The risky loans started the subprime mortgage crisis, which impacted all these financial institutions, which needed government bailouts." As Media Matters for America has documented, the assertion that the financial crisis was caused by banks lending irresponsibly to comply with the Community Reinvestment Act (CRA) is widely discredited. According to housing experts, the vast majority of subprime loans were made by independent lenders not covered by the CRA, which applies only to depository institutions, such as banks and savings and loan associations.
During the broadcast, Hannity asserted of new regulations that might attach to efforts to solve the economic crisis: "[I]f we're going to go into this era of government regulation, let's just stand back and see how we got here. The federal government and the Democrats, they forced these banks, through the Community Reinvestment Act, to make these risky loans," leading to the need for government bailouts of financial institutions. Hannity concluded: "In other words, government caused that problem."
In fact, legal and financial experts on housing issues dispute Hannity's conclusion. A study released earlier this year by a law firm specializing in CRA compliance estimated that in the 15 most populous metropolitan areas, 84.3 percent of subprime loans in 2006 were made by financial institutions not governed by the CRA. Moreover, Janet Yellen, president and CEO of the Federal Reserve Bank of San Francisco, stated in a March 2008 speech that "studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households" [emphasis added]. And University of Michigan law professor Michael Barr testified before the House Financial Services Committee in February, saying: "More than half of subprime loans were made by independent mortgage companies not subject to comprehensive federal supervision; another 30 percent of such originations were made by affiliates of banks or thrifts, which are not subject to routine examination or supervision, and the remaining 20 percent were made by banks and thrifts."
From the November 24 edition of Fox News' Hannity & Colmes:
HANNITY: Hey, Dick, let me -- let me raise this question with you here. First of all, the left and a lot of Obama supporters are very resentful at the high numbers of Clinton operatives that are now in the camp. That's issue No. 1. You've got the problem of Bill's ethics. That's question No. 2. You've got all these leaks. The Obama people seem to be resentful that it's coming as soon as the Clinton speculation began here. And then on top of it here, you know, I think it reveals their real inexperience. And they disagree on Iran, Iraq, Afghanistan, Pakistan, and on Russia. These are big issues.
DICK MORRIS (Fox News political analyst): Put it simply, Sean -- put it simply, Sean, Hillary Clinton was going to be the Democratic nominee for president until Barack Obama challenged her. The basis of his challenge was that he didn't agree with her foreign policy. Now he just appointed her to run foreign policy. If that isn't cynical, I don't know what is.
HANNITY: All right. So could we put that together, then, with the economic plan? I mean, his entire campaign on economics was he was going to tax the rich. "Read my lips, I'm going to raise taxes on the rich." He's backed off that. So how do we interpret this, that he said anything to get elected?
MORRIS: Yeah, I think that's true, and I think he's adjusting to economic realities, but let me just do an overview with this thing, because the events move so quickly. The era of the free-market consensus began in 1989 and ended in 2008. And we're now into a new era where the consensus will be at least government regulation and perhaps government management, and that's the era Obama is in. He won't raise taxes on the rich, because he doesn't have to. He's allowed to have a deficit as large as he wants.
HANNITY: But Dick, well, let's examine this a little bit --
MORRIS: A trillion-dollar deficit. No economic discipline, no fiscal discipline. And he'll pass his entire liberal agenda under a new tag, calling it the stimulus package.
HANNITY: All right, but if we're gonna go into this era of government regulation, let's just stand back and see how we got here. The federal government and the Democrats, they forced these banks, through the Community Reinvestment Act, to make these risky loans. The risky loans started the subprime mortgage crisis --
HANNITY: -- which impacted all these financial institutions, which needed government bailouts. In other words, government caused that problem. Government trade policy, energy policy, CAFE economy standards, safety standards, they caused the problems in Detroit. So now we're going to double down on the very root cause of our economic decline --
MORRIS: But Sean --
HANNITY: -- by including government more?
MORRIS: Yeah, that's exactly what we're going to do. And it's wrong in the way that you articulate it, but let's be honest about the long-term nature of this problem. Fifteen years ago, the total debt owed by everybody in the world to everybody in the world was equal to the global gross domestic product. They were the same number. Now it's four times as much. That extra debt is like heroin that we've been taking, and our whole economy has been based on it. And we're going cold turkey now to get out of the debt. If we don't, we'll never cure this problem.
HANNITY: But I'll tell you --
MORRIS: What the fiscal stimulus package is, is methadone to ease the pain.
HANNITY: A hundred and seventy-five billion was his original proposal. Now they're up to $700 billion, and if you read, you know, Bloomberg today -- and I'll get into this when we get back -- $7 trillion we're going to be on the hook for. We can't afford this. But more with Dick Morris after the break.