Friday, October 10, 2008

An Inconvenient Truth - Meltdown Myths Debunked

I was reading the Wall Street Journal when I came upon an article that I thought was interesting. I'm just going to quote it here.


Barney Breaks It Down


Barney Frank (Democrat) has found another cause for the credit panic: racist Republicans! "They get to take things out on poor people," the House Financial Services Chairman said at a Boston symposium Monday. "Let's be honest: The fact that some of the poor people are black doesn't hurt them either, from their standpoint."

No one thinks poor or black people are to blame for the lending mania at the root of the mess. But there is little question that it resulted, at least in part, from a push to relax lending standards so as to make it easier for poor and minority borrowers to get mortgages. This in turn created incentives for banks to make bad loans, many of which Fannie Mae and Freddie Mac acquired.

An influential 1992 report from the Boston Fed recommended: "Policies regarding applicants with no credit history or problem credit history should not be seen as a negative factor. Lack of credit history should not be seen as a negative factor. Certain cultures encourage people to 'pay as you go' and avoid debt." The head of the Boston Fed at the time, Richard Syron, was ousted last month as CEO of Freddie Mac.

Not all Democrats agree with Mr. Frank that such policies are off-limits to criticism. Last week Representative Artur Davis of Alabama said in a statement: "Like a lot of my Democratic colleagues I was too slow to appreciate the recklessness of Fannie and Freddie. I defended their efforts to encourage affordable home-ownership when in retrospect I should have heeded the concerns raised by their regulator in 2004. Frankly, I wish my Democratic colleagues would admit when it comes to Fannie and Freddie, we were wrong."

Mr. Davis is a Member of the Congressional Black Caucus.



Rep Artur Davis



OK, a little history here. In 1977 Democratic President Jimmy Carter created a new law, with the help of a Democrat-controlled congress, requiring that banks toss their standards for loans and give home loans to people with lousy credit, primarily black people. It was called the Community Reinvestment Act and it was a blatant attempt to pander to black voters. President Carter said it was discrimination that poor blacks with bad credit histories didn't live in a big tax-payer funded mansion like he did, so he basically ordered banks to hand out the cash and to hell with the consequences.

In 1992, Governor Bill Clinton ran for president, promising "middle class tax cuts" exactly like the ones current Senator Barack Obama is promising in his television commercials while campaigning for president.

In 1993, new President Bill Clinton passed the largest middle class tax INCREASE in history. He then went on to strengthen Jimmy Carter's Community Reinvestment Act by increasing the amount of bad mortgage loans banks were required to hand out.

Enter President George W. Bush, who upon examining the state of Fannie Mae and Freddie Mac, now run by former Democrats, said that there was a great cause for concern and alarm.

Representative Barney Frank responded to President Bush by saying, "Fannie and Freddie are not facing any crisis.”

This is the exact same response that I received while working for a Big Alabama Bank just 3 years ago when I tried to talk to some of their VPs about what we in the Memphis corporate office were finding while auditing the mortgage loans that the Big Alabama Bank had brought into the merger with our Big Memphis Bank. They simply didn't want to hear about it.

Well, they're sure hearing about it now.

Meanwhile, all in the Press and in political television commercials we're hearing about how the Republicans are to blame for this mess. I'm no fan of the Republicans, as I've made clear here many times, but I know who is responsible for this disaster and I know who is not. I hate the thought that we are once again about to elect a new President based on lies and false promises. I was perfectly content to watch Americans foolishly elect a new President based on the fact that he is shiny and new and they know absolutely nothing about him, as compared to his opponent who is old and experienced, but something of an ass sometimes. Hell, we do that all the time. That's where Presidents Clinton and Kennedy came from. It's seeing the guilty not only getting away with creating this global disaster, but actually standing up and blaming the people who tried to stop it that is getting to me.

It's one thing to look at this disaster and say "ah ha, this is a great opportunity for my preferred candidate and his party to take advantage of a crisis and use it to get into the White House." But it is quite another when you yourself have to drive around a city that received a disproportionately large percentage of those mortgage loans and see firsthand family after family, most of whom are black, sitting on the curb with their children and all of their belongings after having been evicted from their homes because they can't afford the mortgage which they should never have been approved for in the first place.

Most of us, both black and white, expect when we apply for a loan, that the lender has at least some responsibility to ascertain whether we have any business receiving this loan in the first place. This may be a bad assumption, but it is one which most of us make when applying for a home loan. We assume the bank checked us out and determined that we will, in fact, be able to make our payments without going bankrupt. When I see these distraught families, their lives in ruins, crying in the streets because of a political ploy that was used solely as a pay-off in exchange for their votes in the past, I get upset. When I hear the very corrupt individuals responsible for this disaster self-righteously blaming the very people who tried to stop them, while simultaneously using the resulting chaos to once again sucker their victims into putting them back into power, I get angry.

I know Machiavelli was right. But I just can't help getting angry. I hate injustice. And most of all, I hate sociopaths.

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