The mess that has produced the current financial crisis has been years in the making. For decades now university propagandists, the media, liberal politicians, social activists, economics professors and even business school titans have turned away from economic reality and to politically-correct sloganeering to cultivate the idea that the private financial system is a tool for social engineering, including a ‘right’ to home ownership.
Meanwhile conservatives always have cautioned that home ownership is a privilege for the thrifty and the industrious, and that ownership entails heavy responsibility.
No mind. The mantra from the left was that somehow home ownership must be made available to as many people as possible and we’ll worry about the responsibilities later. Because at its core, socialism ultimately rejects the idea of personal responsibility and accountability in favor of nanny-state caretaking.
Legislation like the Community Reinvestment Act, passed into law in 1977, is defined on Wikipedia as “a United States federal law that requires banks and thrifts to offer credit throughout their entire market area and prohibits them from targeting only wealthier neighborhoods with their services, a practice known as ‘redlining’. The purpose of the CRA is to provide credit, including home ownership opportunities to underserved populations and commercial loans to small businesses.”
Notice the class-warfare language: “…and prohibits (banks) from targeting only wealthier neighborhoods.”
Everyone knows that banks have always lent in poorer areas, but cautiously. And for good reason. But anyone with immigrant parents or grandparents knows that lesser neighborhoods have always been served by banks. How else did these neighborhoods come into existence? Then legislation like CRA simply became a bludgeon to threaten banks to open up their vaults to all. Banks caved in rather than risking becoming targets of ‘discrimination’ suits that could be ruinous.
This was the type of intimidation that has led to the current crisis. Of course there are other factors, but laws like CRA were the basis for the negation of lending standards and disciplines by those stingy ‘conservative bankers’. And this negation blossomed, the same way that taxation has incrementally crept into all phases of the American economy.
Legislation like CRA has been ruinous to many institutions including Delta Financial Corporation, a New York City-area lender that had on its board Maggie Williams, who served as chief of staff for Hillary Clinton in her first term as First Lady of the United States. Williams served until Delta went bankrupt in December 2007.
Delta offered mortgages “to subprime, or less creditworthy borrowers,” said one news report.
Williams went on in January 2008 to become Hillary Clinton’s campaign manager, just as James Johnson of failed Fannie Mae and failed Lehman Brothers went on to join the Obama campaign.
Is there a connection between mandated lending, failed institutions and the Democrat party?
And by the way, which Wall Street hedge fund employs Chelsea Clinton?
Don’t expect any congressional witch hunts in this crisis. There are too many Democrats involved.
Myriad other mandates and regulations essentially told the banking community that the ‘shelter’ in ‘food, clothing and shelter’ meant home ownership, not just a roof over your head.
In other words, over-regulation…
Add to this the idealist liberal mantra that every citizen is entitled to everything and you have the current housing crisis.
The fact is that millions of people at all different levels of income never are ready for home ownership – the mortgage payments, the upkeep, the taxes and insurance. It is a complicated process, risky, often stressful, and expensive too. Of course there are rewards in home ownership, but only for the wise and the diligent.
Meanwhile many simply have preferred to take the less risky path of renting. None of them today are losing their domiciles and all their equity for failing to pay the mortgage. Hey, not bad.
Owning a home is no guarantee of anything. The recent drop in housing values proves that. And the forced loan-making by government fiat, along with the politically-correct attitudes among those inside the contemporary banking industry combined to cook a toxic stew of irresponsible lending best summed up in the so-called NINJA loan – no income, no job.
This could very well be the beginning of the end for responsible people in America who work hard to attain their dream. Today, the government is going to enter the mortgage market to the tune of $700 billion and buy bad assets to give the banks liquidity to loan again. Along with $200 billion for Fannie Mae and Freddie Mac, $85 billion for AIG and $29 billion for Bear Stearns, you would think we had money to burn.
Of course, the system has reached the point where there is not much option except massive government intervention. The credit system had sand in the gears and the government is the only institution with the wherewithal to free it up quickly.
Now that the government is going to buy all these mortgages, however, the Democrats are not about to stop. No siree. After causing much of this mess in the first place, they are now demanding that any authorization from Congress include additional financial assistance to help struggling homeowners avoid foreclosures and other giveaways. In other words, after the giveaway culture undermined the mortgage system, the Democrats are using this opportunity to try to give away more cash and buy more votes.
It is likely that the final tab to the government will be less than $700 billion because sales of the bad mortgages assets could net the government a good return in the long run after the market improves. That would be nice. But we should never forget where this crisis came from in the first place.
This fiasco should teach us to stop thinking about the free market as someplace where some people get stuff for free and then, when they fail to live up to their responsibilities, they get more free stuff. This is the road to ruin.
Please visit my website at www.nikitas3.com for more common sense.