The subprime mortgage situation has caused a lot of trouble for the US. A lot of people blames President Bush. I suppose the Bush Administration deserves some of the blame for not recognizing the mischief Bill Clinton had wrought, and taking some sort of action. But the root of the problem is clearly the action of Clinton in demanding that home loans be given to people without checking on their ability to repay the loan. Here is a comment made by someone named Ed from Illinois to Walter Williams's column today that sums up what happened.

Perhaps you are unaware of the roots of our current predicament. I was around when Sandy Weill(Citigroup CEO at the time) stood hand in hand with Bill Clinton and Jesse Jackson on a stage in New York proclaiming a new world order with the advent of the new Community Reinvestment Act regulations prohibiting redlining of neighborhoods for purposes of mortgage financing. All people would be entitled to receive mortgages and home equity loans regardless of where they lived or their dubious credit standing. The federal government would make sure these loans were provided promptly and universally lest the lenders be harassed for racial/socioeconomic discrimination. Lenders tried to find a way to protect themselves by securitizing these loans and creating Collateralized Mortgage Obligations, Asset Backed Securities, Collateralized Debt Obligations, etc. They followed the principle of diversification to avoid the wrath of the federal government. Well, it worked for a while. But as with all government sponsored Camelot schemes, reality returned with a vengeance. Oh, and let's not forget Bill Clintons virtually unilateral decision to cease new domestic oil and natural gas development in 1995. That could not possibly have had an impact on the future supply (read price) of crude oil. Some people will never get it. You can't repeal the laws of economics. But, as with Bill Clinton and the Democrats, you can ignore and flaunt them with impunity until the next election cycle. Learn the rules of an open market economy or be condemned to live with the consequences.

(I was dumb enough to not sell my shares in Citigroup. When my broker told me that Citigroup had no subprime loan exposure I assumed he knew what he was talking about. That was a bad mistake.)