I have smelled a “PC” rat ever since the “Sub-Prime” mortgage mess hit the front pages, and it turns out I was right. Back in the early 90’s we re-mortgaged our house to get rid of our Adjustable Rate Mortgage, and lock in the low Fixed Rates that were being offered at that time.
It was like dealing with the Gestapo! The lender examined every facet of our lives in minute detail. It just never made sense to me that these fastidious lenders suddenly lost their collective minds and began willingly handing out money regardless of the borrower’s credit history or ability to repay.
The operative word here is “willingly”, and the answer is: they did not!
Remember the “Savings and Loan Crisis” of twenty odd years ago? That was caused by fuzzy brained politicians and bureaucrats too. The bleeding hearts in Washington were just outraged that a person with $100,000 to plunk down could negotiate a higher rate of return with his bank, while Joe Average Saver was stuck with the 4.0%, roughly, that Savings Banks and S & L’s were paying at that time. Their answer was to create “Certificates of Deposit” that would enable even small savers to earn higher returns.
Very noble, but the reality was that Commercial Banks, with their short term, high return, commercial loan base, were able to offer higher rates on their CD’s than the S & L’s with their 20 to 30 year low return mortgages. The result was dubbed “Disintermediation”, a ten dollar word meaning money rapidly flowed out of the S & L savings accounts and into the Commercial Bank’s CD’s. The S & L’s tried to compete, but were paying out more in CD interest than they were taking in on their mortgage loans.
Depleted of capital, the S & L’s began to fail in wholesale lots, and the Washington inspired crisis turned into a snowball rolling downhill. Of course, the politicians and their cronies in the media (yes, back then too!) immediately blamed the whole thing on “greedy” and “dishonest” Bankers. The media was full of stories about these bloated bankers traveling around in their chauffer driven limousines. Imagine! Who do they think they are…Politicians????
Now fast forward to 2008, and think “Predatory” lenders. You know who I mean: those mortgage lending criminals who went into minority neighborhoods with machine guns, lined people up against the walls, and screamed “Sign Here or Die!!”
Finally, here is the “Inconvenient Truth” that the Democrats are desperate to hide from the American people: Democrats from Jimmy Carter on down were the ones responsible for the Sub-Prime Mortgage Crises!!!
At last, the other side of the story has been published, and the truth takes us full circle back to the S & L crisis. This time, as it turns out, the culprits were the Federal Reserve Banks, in league with the Comptroller of the Currency, various left wing social advocacy groups and bleeding heart politicians.
The whole sad story was laid out in an article last year in the New York Post (thank you, Mr. Murdock!) by Stan Liebowitz, an author and Professor of Economics at The University of Texas. According to Professor Liebowitz, the Boston Fed, on the basis of a badly flawed 1992 study, ruled that: “discrimination may be observed when a lender’s underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants.”
Some of these “outdated” criteria included the size of the mortgage payment relative to income, credit history, savings history and income verification. Instead, the Boston Fed ruled that participation in a credit-counseling program should be taken as evidence of an applicant’s ability to manage debt.
Sound crazy? You bet. Those “outdated” standards existed to limit defaults. But bank regulators required the loosened underwriting standards, with approval by politicians and the chattering class. A 1995 (Bill Clinton) strengthening of the Community Reinvestment Act required banks to find ways to provide mortgages to their poorer communities. It also let community activists intervene at yearly bank reviews, shaking the banks down for large pots of money. By the way, the original Community Reinvestment Act was passed during Jimmy Carter’s administration. Hmmm…a familiar caste of characters.
Banks that got poor reviews were punished; some saw their merger plans frustrated; others faced direct legal challenges by the Justice Department.
Here is the link to the full article. Be prepared to get very, very, angry. Once again we have politicians and bureaucrats interfering in the market place, with the same disastrous results. There is more to this, more names that could be named, but we will save that for another time. Sufficient here that we understand that this mess was caused entirely by bleeding heart liberal Democrats! Wall Street’s role was to create and sell derivatives based on these toxic loans. But Wall Street played absolutely no part in the origination of those loans.
http://www.nypost.com/seven/02052008/postopinion/opedcolumnists/the_real_scandal_243911.htm
And once again, their will be no price to pay for the people responsible for almost destroying our economy, and forcing U.S. businesses to sell pieces of themselves to foreign entities just to survive. Instead, their cronies in the media will continue to bleat about Wall Street’s guilt. In fact, we can easily look ahead and predict that blaming Wall Street will be the Democrats main theme in November’s elections