Diary

When Bankers Were 'Conservative'

Long ago banks were ‘conservative’ institutions. Remember when tight-fisted lenders demanded 20% down for a mortgage? And when you were required to have a steady job and a good credit history to get a loan? And they actually expected you to pay back the money that they lent you?

 

It’s a good thing those days are over, liberals like to say. In fact, since the 1960s, liberals have managed to libel all conservative institutions, including banks. This is the message that has permeated our culture since the ‘hippie’ days – that banks and corporations are corrupt; that the nuclear family is outdated; that promiscuous sex is normal; that sloth among the dependent poor is acceptable, and even desirable. In other words, virtue is vice and vice is virtue.

 

These ways of thinking have given way to, respectively, the current economic crisis; the ruin of marriage and the destruction of the family unit; the spread of sexually-transmitted diseases and abhorrent social behaviors; and a dependent underclass that is expanding every year and wondering why it cannot dig itself out of the hole that it is in.

 

But if private banks have all the money, and ‘the people’ need money, said the political left, then government therefore needs to expand itself to get its hands on the money that ‘the people’ need. So taxes have risen relentlessly to the point that many Americans are paying 50% of their gross income to the government. And the government then is using that money as it sees fit, to act like a banker to ‘the people’.

 

That has not been enough, however. In 1977 Congress passed, and Jimmy Carter signed, the Community Reinvestment Act which, says wikipedia.org, was ‘designed to encourage commercial banks and savings associations to meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods’.

 

Note two things: The word ‘encourage’ and the phrase ‘moderate-income’. These are telling.

 

CRA was an extension of the Equal Credit Opportunity Act of 1974 which banned discrimination against borrowers on account of race, color, religion, national origin, sex, marital status or age, with civil liability for offenders. CRA itself, however, went further and sought to remedy alleged discrimination by banning ‘redlining’, in which banks refused to lend any money at all in certain geographic areas or neighborhoods.

 

But CRA did not end up ‘encouraging’ banks to loan in those neighborhoods, as wikipedia says. It ended up forcing banks to make loans in neighborhoods – and to people – once deemed risky. This is how socialism works: It starts with a nice-sounding intention and then expands into coercion.

 

And critically, CRA began to include ‘moderate-income’ borrowers. In other words, it evolved from a program designed ostensibly to help ‘the poor’ into a government prop for the middle class, which is classically the way that socialism spreads its influence.

 

And if banks were seen as avoiding their responsibilities under CRA and other government mandates, those banks could expect to be charged in court. Worse they would have to face the wrath of groups like the notorious ACORN, which has picketed banks and challenged in court the business practices, expansions and mergers of institutions seen as offenders.  

 

So socialist activists had backed banks into a corner.

 

But wait, there’s more…

 

Then the government-sponsored Federal National Mortgage Association, founded in 1938, started buying up the risky loans from the banks. So the banks could make any loans knowing that FNMA would buy them and take the risk off the banks’ hands.

 

It was just another way for the government to loan money, but using private banks as conduits, like having a government lending office in every town. Then in 1999, FNMA went further and began the disastrous policy of buying loans made to people with ‘no income, no job’, or so-called NINJA loans. And this is largely how trillions of dollars in bad loans got into the system and brought down the whole mortgage market.

 

But alas, there’s even more…

 

Over the last 40 years, a third liberal idea slowly has taken hold, that banks should become institutions of social engineering from within. This concept had taken root in the universities, the media and even in the business schools. So rather than just regulate from without, many of the people inside today’s financial industry are liberals who are pushing their agenda from within. Wall Street today is much controlled by liberals. One recent survey found that 60% of the campaign contributions in 2008 from the nine largest Wall Street firms went to Democrats, after the media have been spreading the myth for decades that Wall Street is just an elite club being manipulated by Evil Republican Bankers.

 

If only it were so…

 

And these liberals have made the financial industry into a tool for their social engineering schemes, including funny-money transactions, anything-goes leverage ploys, and loans for all. This is why the current banking industry is in such straits. Cautious conservatives have been pushed out in favor of politically-correct practitioners driven by socialist greed.

 

For instance the once-revered Citigroup, operating under the aegis of its Golden Boy honcho Robert Rubin, lost $20 billion in 2008, just a few years after Rubin started encouraging Citigroup in 2004 and 2005 to engage in risky practices to increase profits.

 

Rubin has years of experience in politics. In the Democrat party, that is. From January 1993 to January 1995, he was assistant to Bill Clinton for economic policy. From January 1995 to July 1999, Rubin was secretary of the Treasury under Clinton. Previous to his government service, this financial lion of the liberal left had served 26 years at the Wall Street investment bank Goldman Sachs.

 

Rubin retired from Citigroup on January 9, 2009 saying he was “tired of it.” What Rubin really was saying is: “I’m not interested in cleaning up the crisis that I created. Let someone else do it. And we’ll blame it all on Bush.”

 

Rubin got more than $125 million in cash and stock during his reign at Citigroup from 1999 to 2009.  He recently was named by Marketwatch as one of the “10 most unethical people in business.

 

Ironically, Rubin says that he hopes to focus on his non-profit work in retirement. Just like he did at Citigroup. No profits.

 

 O, for the good old days when conservatives ran the banking industry. This crisis never would have happened.

 

To understand how banks themselves have been undermining our financial industry by ignoring conservative policies, consider Seattle-based bank Washington Mutual, which collapsed in 2008 under $11.5 billion in bad debt.

 

In interviews, WaMu employees along with mortgage brokers, real estate agents and appraisers painted a picture of an institution out of control, approving any kind of loan in order to take advantage of the booming market of the mid-2000s.

 

One appraiser said that WaMu was like “the Wild West. If you were alive, they would give you a loan.” Said another: “These people broke every fundamental rule of running a company.” Said a third: “It was a disgrace. We were giving loans to people that never should have had loans.”

 

Why was WaMu acting in this way?

 

Because there were no conservatives around to preach thrift, that is why, people like our Founding Fathers who warned about greed and debt and profligacy. And the government was going to buy the loans anyway. Because WaMu could earn the fees and the government would assume the risk.

 

WaMu expanded 70% between 2000 and 2003, to 2,200 branches. WaMu employees were pushing loans left and right. One San Diego employee said that most loans required only a Social Security number, an address and a statement of income and assets. A landscaper who needed a loan was photographed with his business pickup truck. That was his credit history.

 

WaMu also used variable-rate loans that earned higher fees to start but that then ballooned after a few years, leaving the borrower bankrupt. But by selling the loans to investors and Fannie Mae, WaMu had no worries. WaMu’s adjustable-rate mortgages expanded from 25% of new home loans in 2003 to 70% by 2006.

 

When Rahm Emmanuel, a former Clintonite who now is Obama’s chief of staff, told Meet the Press on January 18 that Obama planned to usher in an era of “personal responsibility” and to end the ethos of “anything goes”, he sounded like an advertisement for that old-fashioned conservative religion.

 

Because ‘anything goes’ has been the hallmark of the socialization of our culture, our government and our banks under decades of liberal influence. And indeed it must end if we are to restore our republic to growth, prosperity and decency.

 

Please visit my website at www.nikitas3.com for more.