Monday, September 29, 2008

Political News/Rant: Republicans Who Blame the Borrowers Getting Tiresome

Hello Bloggers - Based on earlier posts (see Monday, September 22nd - Political Rant: Absurd Republican Spin About Crisis Continues Unabated) you might have caught on that I'm kind of upset with all the Republicans who are blaming the credit crisis on minorities and others who they say "scammed the system." Many are friends of mine. They always talk about the Community Reinvestment Act and point to data that shows how much it helped encourage minority lending - see YouTube for the many propagandist videos set to music on the subject.

However, there is plenty of evidence that proves a lack of government oversight under the Bush Administration is the real culprit. There were plenty of laws and regulations in place, but predatory lending was allowed to go unchecked over the past eight years.

I owned an Internet company here in LA from 1999 to 2004 and just after Bush's inauguration a major supporter opened a quick and dirty mortgage resale company across the hall with cubicles filled with mortgage sellers pitching their wares. I spoke to many of their twenty-something year old staff at the time, and remember being shocked by the way they were compensated - mostly by commission. They called their work "pitching the poor" at the time. I'll never forget it. Something told me what they were doing was wrong at the time, and I hate to say it but my instincts were correct. If somebody like me knew something was wrong, why didn't the government, the press, and the whole business community? It was common sense. They were the predators, and that company was a good example of one that should not have been allowed to exist.

Here are excerpts from another article that might help clarify the situation for my more hard-headed Republican friends: Viewpoint: Minorities a convenient scapegoat for U.S. financial woes

"In the midst of a severe financial crisis - a meltdown fueled by clueless homebuyers, greedy lenders and money-grubbing financiers - some observers have decided to blame "minorities" for the mess. Though wiser heads have proclaimed the emergency too serious for partisan gamesmanship, some in the conservative commentariat still can't resist playing the race card."

Several days ago, Neil Cavuto, host of Fox News' Your World, proclaimed, "Loaning to minorities and risky folks is a disaster." On WorldNetDaily, a compendium of loopy half-truths, pundit Drew Zahn declared that "when federal regulators demanded parity between racial groups in lending, the only way to achieve a quota would be to begin making intentionally bad lending decisions." The conservative National Review Online trotted out a favorite whipping boy, the Community Reinvestment Act, claiming that the legislation was the result of "racially inflammatory campaigns" that forced banks to "make mortgages available to people without much in the way of income, assets or credit."

"Why would anyone inject skin color into a debate over credit? There is certainly no evidence to support this claptrap. Federal regulators have never "demanded parity between racial groups in lending." Not ever. The CRA - designed to stop banks from "redlining," or withholding loans from entire neighborhoods - has long been under attack by conservatives, but for entirely different reasons. Critics called it vague, contradictory and useless. They claimed it was unfair to banks and thrifts, which were regulated, while other financial institutions were left to lend money as they saw fit."

"That's where the argument tying the CRA to the credit crisis breaks down. The lending frenzy developed during the past few years, a period during which banks and thrifts made less than 25 percent of mortgage loans. (The law has been in place for 30 years, during most of which time there was no mortgage meltdown.) "The heart of the crisis was caused by unregulated and lightly regulated mortgage brokers and independent mortgage bankers and affiliates that are not subject to the CRA. It would be quite odd if an act ... caused institutions not subject to its purview to do things that were inappropriate," said law professor Michael Barr, who has studied this legislation. I hold no brief for dumb homebuyers, be they white, black or brown."

"But minority homeowners were frequently the victims of aggressive practices by mortgage brokers who received higher commissions for steering buyers into high-cost, subprime loans, even if the buyer would have qualified for a prime loan. The Center for Responsible Lending, a nonprofit research group, examined 50,000 subprime loans nationwide and found that blacks and Hispanics were 30 percent more likely than whites to be charged higher interest rates, even among borrowers with similar credit ratings. Again, lenders didn't push those loans to comply with any "affirmative action in lending" programs. They did it to make money. That's the same reason Wall Street's masters of the universe created all those exotic investment vehicles - instruments they didn't understand any better than some homebuyers understood their adjustable rates."

(Read the whole article at:,0,6004405.story)

So, I hope that my Republican friends and fans who keep insisting the lending crisis was caused by forced lending would stop it. You are not allowed to pick and choose the facts. You must let it go. People who blame the borrowers are not looking at all the facts. We should not accept parsed debates in this country. The Bush years are almost over and it is time to go back to insisting that all the facts are considered.

Monday's Political News/Rant #2 - Michael

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