Bill Clinton, Home Wrecker

Posted 09/23/2011 06:47 PM ET

Subprime Scandal: Bill Clinton has summoned the media to listen to his take on the never-ending financial crisis. But the man who is now portrayed as an oracle was in fact its chief architect.

In an interview for his annual Clinton Global Initiative meeting in New York, the former president blamed the mortgage meltdown and ensuing record poverty on a "30-year anti-government rant."

"The American Dream has been under assault for 30 years," Clinton said, lecturing banks to "clean up their financial books" of all the toxic mortgages they made.

This is galling even for Bill Clinton.

He's the one who originally pushed them to make those really dumb loans. And then he baited Wall Street to game the perverse system he created. Nobody put the American Dream of owning — and keeping — a home "under assault" more than he did.

Rewind to 1994. While everyone was worried about Clinton socializing health care, he was busy socializing mortgages. To boost minority homeownership, Clinton toughened anti-redlining rules and launched a federal assault on mortgage underwriting standards.

He enlisted no fewer than 10 federal regulatory agencies to crack down on prudent lenders. He named his anti-bank SWAT team the Interagency Task Force on Fair Lending.

"I want to target new (housing) markets, underserved populations, tear down the barriers to discrimination wherever they are found," Clinton said. "We have to do a better job of reaching the underserved; of eradicating discriminatory practices that prevent minorities from finding, financing or buying the home of their choice.

"We can widen the circle of homeownership beyond anything we have ever seen," he added.

Indeed, Clinton's policies for the first time threw millions of previously unqualified buyers into the mortgage mix, fueling an unprecedented housing bubble.

Between 1995 and 2005, according to a new book, "The Great American Bank Robbery," minorities accounted for nearly two-thirds of household growth and contributed a whopping 49% of the 12.5 million rise in homeowners over the decade.

When bankers resisted being saddled with the risky loans, Clinton tapped Fannie Mae and Freddie Mac to take them off their books, freeing bankers to make more of the political loans. He directed HUD to hike Fannie's and Freddie's goals for underwriting affordable loans.

HUD has the power to enforce their loan programs, and required that at least half of all Fannie and Freddie mortgage purchases benefit poor and minority families — a level that remained in force throughout the 2000s.

When the mortgage giants pushed back, complaining it would be hard to meet the higher targets, Clinton had his HUD regulators encourage them to load up on subprime loans.

In a fateful move, he also authorized Fannie and Freddie for the first time to issue, guarantee or buy securities backed by bundled subprime mortgages to earn credits against the HUD goals. The mortgage giants jumped at the chance, since it allowed them to meet the onerous new goals in wholesale fashion.

For good measure, Clinton late in his second term installed several of his cronies — including White House budget chief Franklin Delano Raines — in key Fannie and Freddie board positions, ensuring they continued his affordable-lending crusade well into the next administration.

By the time he left office, Clinton had changed the rules for risk in the lending business. He had fundamentally changed the home finance market for the worse.

This untold Clinton scandal stayed hidden until the bubble burst. Now the former president is conveniently a critic of the very loans he promoted.

He was all for them before he was against them.

Interestingly, "Bank Robbery" notes that the Clinton Foundation that sponsors his global initiative has scrubbed from its website Clinton's boasts of shaking down banks for riskier minority loans.

History should deal harshly with this former president. He didn't just damage the dignity of the presidency with his personal failings. He may have permanently damaged American living standards.