The story of man’s fall is in part the history of unintended effects of his initial actions.
Paris of Troy falls in love with Helen of Sparta that puts to sea a thousand Greek ships, and the Trojan War is unleashed. Gavrilo Princip, driven by his Serbian nationalist fervour, assassinates the Archduke Franz Ferdinand of Austria and it ignites the First World War. Neither Paris nor Princip calculated the unintended effects of his initial actions.
As the United States is rocked by the worst financial crisis since the Great Depression, and a deep recession or worse looms on the horizon threatening the global economy, politicians – Democrats and Republicans – have scrambled to work out a rescue package for the collapsing capital market.
But how could the U.S. government be unaware of the capital and liquidity crunch of such dimension building up over time so that a taxpayer bailout of Wall Street to the tune of a trillion dollars was urgently needed? How did this tsunami of bad loans come about in the first place?
The story is one of unintended effects. And politicians who unleashed it have remained in full throttle of denying responsibility.
The origin of the crisis goes back to 1977 when then president Jimmy Carter signed into law the Community Reinvestment Act (CRA) passed by the Democratic-controlled Congress.
MORTGAGES FOR ALL
The CRA required, as the U.S. Federal Reserve Board notes, “depository institutions to help meet the credit needs of the communities in which they operate, including low and moderate income neighbourhoods, consistent with safe and sound operations.”
In other words, by law lending institutions were instructed to provide money as mortgages and commercial loans to underserved communities of mostly low income Afro-Americans and underprivileged minorities with poor credit history.
The reasoning behind CRA was to make housing affordable for that segment of the American population that could not meet credit tests of the financial industry. The CRA was civil rights action with roots going back to the Great Society push of President Lyndon Johnson’s administration a decade earlier.
The CRA requirement brought loosening of underwriting standards by lending institutions, and the beginning of bad loans or the “sub-prime” mortgages. The two government-sponsored lending institutions – Fannie Mae and Freddie Mac – aggressively pushed sub-prime mortgages to high risk borrowers, and then covered the questionable mortgages by access to government-backed credit legislatively available from the U.S. Treasury.
In 1995 during Bill Clinton’s administration, amendments to the CRA increased lending for home purchases and the bad loans piled up while a frenzy of buying led to a real estate bubble.
In 2003 President George W. Bush’s administration sought a corrective overhaul of the lending practices and in 2005 Sen. John McCain pushed for reform oversight of Fannie Mae and Freddie Mac.
BUSH FIX DERAILED
On both occasions corrective measures were derailed in the Congress subcommittee hearings by the Democratic leadership led by Sen. Christopher Dodd in the Senate Committee on Banking and Congressman Barney Frank in the House Financial Services Committee.
The politics of affirmative action for affordable housing twisted sound financial practices, and over time it created a heated housing market that could not be sustained indefinitely.
A mountain of bad loans eventually crashed, and the U.S. capital market was frontally assaulted by the unintended effects of the CRA.
He is a member of the Board of Directors for the Center for Islamic Pluralism based in Washington, D.C., a Senior Fellow with the Canadian Coalition for Democracies, and an academic-consultant with the Center for Security Policy in Washington, D.C. He has been a consultant with CIDA on development issues and has published widely in academic journals on foreign policy matters and area studies of the Middle East and South Asia.
Mansur is featured on the documentary Obsession: Radical Islam's War Against the West produced by the David Horowitz Freedom Center. He also unsuccessfully ran for the Canadian Alliance party in 2000.
Mansur has been accused by Canadian Islamic Congress of using "provocative, self-serving rhetoric", and for "promoting an anti-Arab and anti-Muslim agenda".
He is an Ismaili Muslim.
At a press conference on October 2, 2008, Mansur stated that "Islam is my private life, my conscience...[but] my faith does not take precedence over my duties...to Canada and its constitution, which I embrace freely;" "I am first and most importantly a Canadian;" "only in a free society will you find Islam as a faith and not a political religion." Mansur also criticized New Democratic Party Leader Jack Layton, whom Mansur said "has gone to bed with Islamists", because he is running candidates in Ontario and Quebec who are closely identified with the push for Sharia law.
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