Are the Clintons the real housing crash villains?

We are going to reveal the grand secret to getting rich by investing. It's a simple formula that has worked for Warren Buffett, Carl Icahn and all the greatest investment gurus over the years. Ready?

Buy low, sell high.

It turns out that Donald Trumphas been very, very good at buying low and selling high, and it helps account for his amazin business success.

But now Hillary Clinton seems to think it's a crime.

Real culprits?

A bank owned sign is seen in front of a foreclosed home.
Getty Images
A bank owned sign is seen in front of a foreclosed home.

Campaigning in California last week she complained that Trump "actually said he was hoping for the crash that caused hard working families in California and across America to lose their homes, all because he thought he could take advantage of it to make some money for himself."

She's assailing Trump for being a good businessman—something she would know almost nothing about because she's never actually run a business, though she did miraculously turn $1,000 into $1 million in the cattle futures market many years ago.

Hillary's new TV ads say that Trump predicted the real estate crash in 2006 (good call) and then bought real estate at low prices when the housing crash came in 2008 that few others foresaw. Many builders went out of business during the crash, but Trump read the market perfectly.

What is so hypocritical about the Clinton attacks is that it wasn't Trump, but Hillary, her husband, and many of her biggest supporters who were the real culprits here.

Before Hillary is able to rewrite this history, let's look at the many ways the Clintons and cronies contributed to the Great Recession.

Seeds of mortgage meltdown

The seeds of the mortgage meltdown were planted during Bill Clinton's presidency.

Under Clinton's Housing and Urban Development (HUD) secretary, Andrew Cuomo, Community Reinvestment Act regulators gave banks higher ratings for home loans made in "credit-deprived" areas. Banks were effectively rewarded for throwing out sound underwriting standards and writing loans to those who were at high risk of defaulting. If banks didn't comply with these rules, regulators reined in their ability to expand lending and deposits.

These new HUD rules lowered down payments from the traditional 20 percent to 3 percent by 1995 and zero down-payments by 2000. What's more, in the Clinton push to issue home loans to lower income borrowers, Fannie Mae and Freddie Mac made a common practice to virtually end credit documentation, low credit scores were disregarded, and income and job history was also thrown aside. The phrase "subprime" became commonplace. What an understatement.

Next, the Clinton administration's rules ordered the taxpayer-backed Fannie and Freddie to expand their quotas of risky loans from 30 percent of portfolio to 50 percent as part of a big push to expand home ownership.

Fannie and Freddie were securitizing these home loans and offering 100 percent taxpayer guarantees of repayment. So now taxpayers were on the hook for these risky, low down-payment loans.

Tragically, when prices fell, lower-income folks who really could not afford these mortgages under normal credit standards, suffered massive foreclosures and personal bankruptcies. So many will never get credit again. It's a perfect example of liberals using government allegedly to help the poor, but the ultimate consequences were disastrous for them.

Additionally, ultra-easy money from the Fed also played a key role. Rates were held too low for too long in 2002-2005, which created asset price bubbles in housing, commodities, gold, oil, and elsewhere. When the Fed finally tightened, prices collapsed. So did mortgage collateral (homes) and mortgage bonds that depended on the collateral.

Many bond packages were written to please Fannie and Freddie, based on the fantastical idea that home prices would never fall. Fannie and Freddie, by the way, cost the taxpayers $187 billion.

Just to make this story worse, Senator Hillary Clinton and Senator Barack Obama voted to filibuster a Republican effort to roll back Fannie and Freddie. But on top of all this, while Hillary was propping up Fannie and Freddie, she was taking contributions from their foundations.

Plenty of blame to go around

A Washington Times investigative report concluded that Freddie Mac and Fannie Mae's political action committee and individuals linked to the companies donated $75,500 to Mrs. Clinton's senatorial campaign. And on top of that, the embattled Clinton Foundation received a $50,000 contribution from Freddie Mac, according to the Times.

To be clear, there was plenty of blame to go around among both political parties and the horde of housing lobbyists who helped set up this real estate house of cards. It's a sordid story with plenty of blame all around. And the Fannie/Freddie story is still not solved. It now includes profit sweeping from shareholders to the government, thereby ending any chance to sell the mortgage agencies back to the private sector.

Meanwhile, Hillary's attempt to blame Donald Trump is utterly absurd. Buying low and selling high is not against the law. In fact, Mr. Trump's investment acumen may serve America well in the not too distant future.

Commentary by Larry Kudlow, a senior contributor at CNBC and economics editor of the National Review. Follow him on Twitter @Larry_Kudlow.

Stephen Moore is chief economist at the Heritage Foundation