Commenter Thom asked per a previous post why more people have not spoken up over the causes of the mortgage industry collapse and its chain reaction in the overall credit market. As promised, the NY Times lays it all at the feet of George W. Bush (link) today. (I believe he bears some blame, and he certainly took credit for increased homeownership stats) But I know why few will discuss the causes, and it’s shown by the first comment on this article (link, read the whole thing!) by Hans Spakovsky:
It’s Time to Uproot the Real Cause of the Mortgage Crisis
Or else American taxpayers will be called upon to bail out the economy again.
December 20, 2008 – by Hans A. von Spakovsky
Support Pajamas Media; Visit Our AdvertisersAs banks, insurance companies, brokerage firms, automobile manufacturers, and God knows who else line up to try and feed at the public trough, the original source of the spreading financial and credit crisis, the mortgage industry, is still in deep trouble. Whether the initial bailout plan passed by Congress will help stem mortgage lenders’ financial problems in the short run is still an open question. But one thing is certain: Nothing in the original legislation or Treasury’s actions and infusion of funds since then have made the legal, regulatory, and enforcement changes required to prevent this problem from happening again in the long run – no matter how many tax dollars the Treasury Department pours into the problem.
Nothing in the mortgage bailout legislation called for Congress to fix the serious problems with the Community Reinvestment Act (CRA) that empower ACORN-style pressure tactics against lenders. Nothing made the Federal Reserve change its lending instructions. Nothing urged the president to change the enforcement policies at the Justice Department and HUD that forced lenders to make risky loans to unqualified applicants.
At its most basic level, this crisis started because of the weakening of mortgage lending standards caused by the Federal Reserve and other federal agencies. Lenders also feared facing discrimination claims and enforcement actions by government law enforcement agencies and organizations such as ACORN.
Consider a faulty study the Boston Fed conducted in the 1990s. It claimed that minority mortgage applicants were rejected at higher rates because of discrimination. Yet a detailed analysis by University of Texas economists Stan Liebowitz and Theodore Day showed that the Boston Fed study was so full of data transcription errors that it was “outrageously unreliable.” When those errors were eliminated, there was no discrimination. Some minority groups do have a higher rejection rate for mortgages on average, but because of weaker credit histories, not discrimination by lenders.
The first comment reveals the easy out for the nanny-staters:
Another View:
I’m glad to be the first comment on this crap.
Sorry Von Barron your Neil Cavuto FOX subtle racism doesn’t fly. First of all there are not enough minority defaults of foreclosures to blame them for the collapse. Every home owning group has there share of blame.Second it is a known fact Wells Fargo tried to steer first time home buyers into o%,3%, balloon and ARM mortgages.
Third why is nobody talking about all the refinancing. Every White homeowner I know refinanced at inflated prices took the cash and ran and know have a adjustable rate they can’t keep up with. So this finger is for you.
One thing that helped birth the current economic issues is not racism, but the threat of being called racist if you say no to someone. Not only that, but if you look at the example of President Bush (43), he wanted so badly to prove that he is not racist that he encouraged the risky business to continue, and now the whole economy is in jeopardy and they still portray conservatives as compassionless racists!