Skip to comments.Underlying collapse, a legacy of racism
Posted on 10/04/2008 11:05:02 AM PDT by jrushing
What few today remember is that one of the government's central goals in undertaking mortgage market reform was to segregate American cities by race. As the insurer of much of the national mortgage industry, the FHA fixated obsessively on fears that racial integration would harm real estate values and leave the government responsible for bailing out legions of failed loans.
(snip) Wall Street Street's apologists have tried to blame the subprime crisis on the Community Reinvestment Act, Congress' tepid attempt in 1977 to atone for the FHA's sins. This argument, of course, is completely ludicrous, since the vast majority of subprime loans were made by institutions that were not covered by CRA. Wall Street and old-fashioned greed drove lenders to offer subprime loans, not the federal government.
(Excerpt) Read more at blog.nola.com ...
The CRA lowered standards for minority communities. This led directly to the Boston Fed saying standards could be lowered for everyone, at the sime time Fannie and Freddie were developing new low/no down mortgage products. It is safe to say that the CRA precipitated the mortgage crisis.
Straw man argument there. While it is true that MOST loans were made by mortgage companies, brokers, etc, which were not covered by the CRA, those mortgages were then packaged and sold to Fannie and Freddie, which were covered by CRA and in fact encouraged subprime lending to unqualified people, including many minorities. Fannie and Freddie are on the hook for 50% of all mrtgages in the US, and in 2006 over 1/3 of new mortgages they bought were subprime.
The author of the article uses one true statement (about CRA and lending) to try to refute the argument that CRA was the genesis of the problem with subprime meltdown. If you dig beneath the true statement, you see Fannie and Fredie through their social engineering goals, used CRA to create this monster which threatens to envelop our entire economy.
That is my understanding about this mess. It seems clear to me. This sounds like just another CYA lie.
Wall Street Street’s apologists have tried to blame the subprime crisis on the Community Reinvestment Act, )
No need for Wall street to be an apologist for this. Anyone with 2 eyes and 2 ears that work knows that the CRA was very much a part of the reason for the current crisis
Greed of the Government (wanting to gain votes)
Greed of the banks (thinking they could make more money faster)
Greed of the people to buy homes they knew they could not afford.
The consequence is their supporters are being tossed on the streets and foreign investors are crying foul.
The crowd around Obama are too stupid for their own or anyone else's good.
Good point. In fact Biden saw fit to mention during the veep debate that supposedly Obama had warned about the sub-prime problem two years ago. If the Dems thought that the sub-primes were not responsible, Biden would have sneered at Palin's citing of the FMs during the debate. Instead he claimed that his party was ahead of it. Which means they're worried greatly that this could still blow up in their faces.
I think you''re right about that.
The Washington Post is saying that the bailout will be a "disaster at the polls" for the GOP. They're deflecting blame to the Republicans.
I don't know why it hasn't. It's clear that the Dems caused this crisis. Why should they get away with this crime?
Do you know if they have offered any proof of Obama’s warning? Is there an article or statement or ANYTHING to prove it? If there is no proof then there was no warning because a TRUE warning makes a blip somewhere - otherwise it is just a “thought”...a “warning” raises the bar.
He betrays knowledge that lots of fingers are pointing at Franklin Raines, Fannie Mae and Freddie Mac (and beyond them, at Bill Clinton and various of his apparatchiks, including, very prominently, the ubiquitous and malodorous Jamie Gorelick) by making a reference to "Wall Street's apologists" and CRA, but then he turns on a dime and blames it all on (white) bankers.
This is political race-pimp journalism du jour, something I didn't think I'd see in the Times Picayune. Looks like the inmates have finally taken over the asylum there.
I've never seen or read anything that discusses Obama supposedly warning about this problem. The very sad fact, for the Dems, is that Obama opposed all attempts at reforming the FMs. Biden mentioning that Obama was concerned doesn't mean anything. He OPPOSED! all attempts at reforming them. That's damning by itself.
Because liberals don’t listen to facts. I have a friend who is conservative as one can be yet votes for democrats everytime. He has no idea what they stand for. But he believes everything they say. And, naturally he believes everything the media says. And this guy is Marine Viet Nam vet and is almost retirement age.
I thought redlining was started by racist bankers, not mandated by the FHA. Maybe the Dems want to go back to this kind of Wall Street "Regulation".
The agency, FHA, mapped the racial composition of 250 American cities and automatically color-coded predominantly African-American and mixed-race neighborhoods red, refusing to insure loans in those areas (and creating a practice known as "redlining.") This guaranteed that banks, which desperately needed federal insurance to do business during the Depression, would not offer loans to people of color or to anyone living in integrated neighborhoods.
That is so true. My mother-in-law said, "I was born a Democrat & I'll die a Democrat."
You can't argue with that kind of thinking. I guess facts don't matter.
I keep the hope that someday, they will.
The truth - a real estate market bubble, the size and scale of which was attainable in the U.S. mortgage market ONLY by the government backed ability ( and negligence) of Freddie and Fannie to fund (buy, and then securitize) the vast majority of mortgages that that bubble needed.
The truth - the bust of that real estate bubble; which, in a more normal, less excessive fashion (one in which the taxpayer guarantee to Freddie and Fannie did not operate as a black hole into which excessive mortgages could be funded), would have been a normal economic slowdown.
The truth - contained within the bubble when it burst was a massive amount of mortgages intentionally of less than normal credit worthy standards - intentionally following mandates of both the CRA and the political mission of Freddie and Fannie.
The truth - the massive amount of intentionally mandated mortgages with less than normal credit worthiness carried, and achieved, a higher rate of default when the bubble burst (which the underlying less than normal creditworthiness predicted), but, with the excessively greater than normal volume and scale such mortgages had been allowed to achieve - intentionally by government sanction - that default rate accelerated, and widened (reflecting the scale of those mortgages that had been permitted) every negative feature of a normal real estate market decline - a more rapid decline in property values, a larger rate of foreclosure, a larger and faster rate of decline of underlying bank assets - supported by the mortgages - and a larger and faster rate of growth of bank liabilities.
The scale of the crisis is relative to the scale of the underlying asset and liability issues. That scale was facilitated and enabled predominately by the behavior of Freddie Mac and Fannie Mae and was most likely not possible to have been reached without their government mandated and negligently administered interference in the markets.
“Wall Street” did not create the crisis, it entered, willingly, a toxic environment facilitated by the massive scale of negligent market intervention achieved by Freddie and Fannie.
(Excerpt from Atlanta Journal Constitution, November 4, 2007)
Blacks dominate subprime loans.
By Carrie Teegardin (firstname.lastname@example.org)
National disparity: Lenders aggressively target minorities for mortgages with higher interest rates.
(COMMENT BY DB: GEE, COULD THAT HAVE BEEN BECAUSE, AMONG OTHER THINGS, LENDERS WERE BROWBEATEN AND PRESSURED TO DO SO VIA CHANGES IN THE HORRIBLY MISNAMED “COMMUNITY REINVESTMENT ACT” BY THE LAST DEMOCRAT ADMINISTRATION AND THE MEMBERS OF CONGRESS WHO CREATED THIS MESS???)
Black Americans of all income groups were much more likely than whites to take out high-interest sub-prime mortgages when buying a home, making them more vulnerable in the ongoing mortgage meltdown.
Nearly half of the blacks who bought a house in 2005 or 2006 ended up in the high-interest mortgage, compared with 13 percent of white home buyers, according to an AJC analysis of federal mortgage debt.
The disparity was striking, even in a comparison of home buyers with similar incomes. Among black home buyers making more than $100,000 a year, 41 percent got a sub-prime mortgage, compared with 7 percent of whites in the same income category.
(For the rest of this piece, you may be able to find it at AJC.COM)
The truism “People operate on the basis of EMOTION rather than LOGIC” was created explicitly for the Democrats/liberals.
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