Republicans:Don’t blame the banks-blame the minorities!
Read Time:1 Minute, 33 Second
The four Republican appointees to the Catfood Commission issued their pre-emptive report and predictably blames the housing bubble and its resulting detritus on big govt (specifically FNMA and FMAC) and even more predictably blames minorities (Page 3, if you need some pain and don’t have the time to bang your head against a wall).
One thing the Republicans always trot out is the Community Reinvestment Act (CRA) of 1977. Briefly, the CRA was legislation which attempted to prevent redlining (geographical exclusion) of minorities and rural Whites from obtaining home loans which they would otherwise qualify for.
Reasoning was, if the community’s money was good enough for the banks to borrow (accept your deposit and pay you low interest) and lend out at higher interest outside of the community, that same credit should be offered within the community as well. Since the govt insured these deposits thru the Federal Deposit Insurance Corporation ( FDIC ) they were within their rights to make this request.
Banks were threatened with heavy fines from the CRA to make them loan $ to unqualified buyers, many of them minorities!
Well, no they weren’t.
One thing to keep in mind is the intent of the CRA was for credit to be extended to qualified borrowers. That was the whole point. It didn’t mandate that anyone lower their standards, only that the same standards apply to all.
The CRA doesn’t have the capability to issue fines, the only stick they have is the threat of a poor CRA compliance report, which could affect the sale or merger of a banking facility.
The CRA only applies to depository institutions. None of the mortgage brokers, the Countrywides, the investment banks and shadow facilities securitizing and slicing/dicing mortgages were covered by it.
The housing bubble was caused by lax oversight and deregulation and easy money. In short, NOT ENOUGH govt.
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I often disagree with you, Oso, or at least feel like I could debate the issue, but I don’t care (this is not one of those times). You have a great writer’s voice and that means more to me than you being right, which you could easily do. You have but to ask me what I think, and then represent that position. I usually don’t know, so if you say you don’t know, you can usually save a step.
Oso, you’re greatest skill is not thinking :). It is saying what you think. It is your written voice. Editors spend years looking for people like you. You are very publishable; not for your mind, but for the way you share it with others.
You’re mind may be good too. I dunno. I am very much into literary expression and you are one of my story-telling heroes, alongside Mark Twain, Burr Deming, and Paul Harvey. If you would just move to the left, and I mean irrationally far to the left, then you would be perfect.
John,
That is is one of the best things anyone has ever said about me, and I appreciate it.
In a sense maybe it’s like a BS ability, being able to pick a topic and run with it?
Almost 30 years ago, I worked with a couple ladies taking a writing class. Three or four times, they were stumped with assignments and I offered to help.It was pretty easy to take a topic and begin writing on it, partly cause the words would kinda flow but mostly cause there was no pressure – if they didn’t like it they could place it in the circular file (before email we used pens – a form of writing utensil and applied it to paper)LOL!
Anyway they got A’s or at worst B’s on the stuff I did for them. Didn’t think much of it till Mike invited me to blog here. I really appreciate what you and several other folks have said here.
Slipping further left may not be possible – but should it be achievable it feels as though that’s where I’m headed.
Thank you!
According to the New York Times (not exactly a conservative publication), in 2003, President Bush (in, yes, what was probably one of his few good moves) tried to impose a staunch overhaul of the entire lending industry. He was beaten back by Congress; the Republicans because they didn’t want to hamper the banking industry, the Democrats because they possessed this ludicrous notion that everybody should be able to own their own home……I’ll just site Jonathan Koppell from the nonpartisan New America Foundation, “Selling Fannie and Freddie as a purely partisan issue doesn’t really work…..Both parties have plenty of responsibility.”
Will,
That’s a misconception – Bush never tried that. He’d have been crucified by the banking industry if he did.The last thing he wanted to do was slow down lending.
What happened was, there were accounting discrepancies at FNMA/FMAC due to them not claiming interest rate swap profits on their taxes, using them for bonuses and dividends.
So the Reps (Hegel and McCain) had a bill to force FNMA/FMAC into another federal regulatory body, away from HUD. The bill died on Rick Santorums desk – cause it was a bad bill. It would have raised the high end limits on FNMA/FMAC loans they could purchase, and forced them to sell off the MBS’s they held in their portfolios – throwing MORE bad debt into the economy.
The bill and the Bush administration support of it had ZERO to do with overhauling the lending industry and was about as staunch as a wet noodle.
It’s part of the same urban legend as CRA lowering standards.
Those were separate attempts, Oso. Bush’s was in 2003. The Hagel, McCain, etc. bill came in 2005, 2006, 2007. Granted, it wasn’t a perfect bill by any means. But the Democrats were in complete/total denial on Fannie and Freddie and proved it by some of their comments. And “Time” agrees. They put Franklin Raines on their list of the top 25 most responsible for the financial crisis……I wasn’t the fault of the “minorities”, as much as it was the fault of those trying (with good intentions) to help them. The law of unintended consequences, etc..
Will,thanks. I’ll have to look into the Bush thing, in my experience it’s often conflated with the Hagel/McCain deal. My mistake, sorry!
Agreed Dems re:FNMA/FMAC, although I think the Rep attacks were ideological not based on economic principle.
Were I to assign partisan blame – Dem or Rep worse, I’d pretty much say a dead heat, particularly when you look at the derivatives thing (CFTC? can’t remember), plus repeal of Glass-Steagall.
Will,
I went to the NYT article mentioned in your post. Click on “article” in previous sentence for link. It’s referring to the McCain/Hagel bill, to move FNMA/FMAC out of HUD and into the treasury. The article refers to the accounting practices (interest rate swaps)which led to the scandal.
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This is a great read my friend and we actually agree for a [refreshing] change. This is one time where we needed bigger government indeed.
I’ll have to put something up about FNMA/FMAC. While they were definitely players, they were late to the game and pretty much got caught up in it.
My guess is the Repubs blame the two Agencies for the perceived govt connection.If memory serves (less and less these days) FNMA was a New Deal thing.Intent was to increase home ownership, local banks could sell their loans to FNMA, FNMA would hold and guarantee the loans and by purchasing the loans it recapitalized the local banks who could then make more home loans.
I’ll look forward to it O-man!