AztecLady speaks: Of all the asinine bullshit!
Friday, October 10, 2008Posted in: American Politics, Azteclady Speaks
Tags:Economic Crisis
Are minorities to blame for the subprime mess?
“The right blames the credit crisis on poor minority homeowners. This is not merely offensive, but entirely wrong.”
From this opinion piece in Newsweek, I’m astounded at how far the right will take the revisionist history. Please take a gander at this:
We’ve now entered a new stage of the financial crisis: the ritual assigning of blame. It began in earnest with Monday’s congressional roasting of Lehman Brothers CEO Richard Fuld, and continued on Tuesday with Capitol Hill solons delving into the failure of AIG. On the Republican side of Congress, in the right-wing financial media (which is to say the financial media), and in certain parts of the op-ed-o-sphere, there’s a consensus emerging that the whole mess should be laid at the feet of Fannie Mae and Freddie Mac, the failed mortgage giants, and the Community Reinvestment Act, a law passed during the Carter administration. The CRA, which was amended in the 1990s and this decade, requires banks—which had a long, distinguished history of not making loans to minorities—to make more efforts to do so.
The thesis is laid out almost daily on The Wall Street Journal editorial page and in the National Review. Washington Post columnist Charles Krauthammer provides an excellent example, writing that “much of this crisis was brought upon us by the good intentions of good people.” He continues: “For decades, starting with Jimmy Carter’s Community Reinvestment Act of 1977, there has been bipartisan agreement to use government power to expand homeownership to people who had been shut out for economic reasons or, sometimes, because of racial and ethnic discrimination. What could be a more worthy cause? But it led to tremendous pressure on Fannie Mae and Freddie Mac—which in turn pressured banks and other lenders—to extend mortgages to people who were borrowing over their heads. That’s called subprime lending. It lies at the root of our current calamity.” The subtext: if only Congress didn’t force banks to lend money to poor minorities, the Dow would be well on its way to 36,000.
I’m not sure I could coherently express my indignation. Fortunately, I don’t have to, because Mr Gross does it for me (thank you, as I’m almost speechless right now):
Let me get this straight. Investment banks and insurance companies run by centimillionaires blow up, and it’s the fault of Jimmy Carter, Bill Clinton, and poor minorities?
These arguments are generally made by people who read the editorial page of The Wall Street Journal, and ignore the rest of the paper—economic know-nothings whose opinions are informed mostly by ideology and, occasionally, by prejudice. Let’s be honest. Fannie and Freddie, which didn’t make subprime loans but did buy subprime loans made by others, were part of the problem. Poor congressional oversight was part of the problem. Banks that sought to meet CRA requirements by indiscriminately doling out loans to minorities may have been part of the problem. But none of these issues is the cause of the problem. Not by a long shot. From the beginning, subprime has been a symptom, not a cause. And the notion that the Community Reinvestment Act is somehow responsible for poor lending decisions is absurd.
The rest of the piece explains in rather big strokes some of the issues with the current economic mess in a way that makes it comprehensible to the novice (me). The last line, though, summarizes my feelings:
Lending money to poor people doesn’t make you poor. Lending money poorly to rich people does.
No shit.
veinglory
October 10
6:59 pm
Yesterday I was at an airport listening to sale guy loudly explain to his friend “poor people are part of the economy, but they don’t *stimulate* the economy. people like us who pay taxes *stimulate* the economy.”
I think that sums it up. When the “economy” is more about how rish people are taxes than it is about performing labor for compensation, well, we’re screwed.
Emmy
October 10
7:14 pm
I don’t know that there is any single cause of this economic crisis, particularly since it seems to be a worldwide phenomenon. I sincerely doubt that broke black people in America are the cause of Iceland on the verge of national bankruptcy, or Japan’s Nikkei dropping 30%.
As for the subprime mess…people who purchased houses they couldn’t afford are as much to blame as greedy lenders who gave them the money to do it and then sold their mortgage off to another bank, thus absolving themselves of risk. Yes, the CRA did put some pressure on banks to lend equally, after an investigation showed that a white family was more likely to get approved for a housing loan over an equally qualified minority family. That was not an open invitation to get greedy and set up waterfall operations to anyone who asked for a loan.
Shiloh Walker
October 10
9:06 pm
I’ve said it before, I don’t know jack about the economy.
But this makes sense. People-regardless of race- trying to live outside their means, going after things they can’t afford led to problems. Banks lending people more money than they could afford to pay led to problems. Greedy companies that already pay their CEOs staggering salaries yet continue to milk every last nickle and dime led to problems. Gas prices.
There is no one guilty party.
edited…
Teddypig
October 10
9:40 pm
Um no, does anyone remember that foreclosures started the subprime mess?
So between poor people and rich house flippers lets google at who had the most foreclosures…
Let us all remember the words of Our Lady of Political Commentary Tina Fey ~
Throwmearope
October 10
9:59 pm
There were people buying homes they couldn’t afford. But the banks and Wall Street firms were borrowing 30 times (thirty– 3 – 0) times their net worth. That is to say if they were worth 3 billion, they borrowed 90 billion (all this with a B folks) dollars. But they blame the poor because they got busted. These credit default swaps were nothing more nor less than a gigantic gamble. And the whole world lost.
If you’re interested PRI’s This American Life has a fabulous explanation of the whole mess here:
http://www.thislife.org/Radio_Episode.aspx?episode=355
(Sorry, technologically impaired, can’t do hot link, my bad.)
Teddypig
October 10
10:08 pm
From Mother Jones…
BUT THAT’S NOT ALL!
Emmy
October 10
10:14 pm
lolz, Teddypig…people who bought more houses then they could afford and then weren’t able to flip them, or had to sell them at a loss fall under my “people who purchased houses they couldn’t afford”.
Really, the people I feel bad for are the renters, who paid their rent on time and ended up getting evicted when the owner didn’t pay the mortgage and got foreclosed on. I applaud the sheriff in Chicago, who has declared a moratorium on foreclosure evictions, since banks weren’t even telling renters that they were going to be evicted. Police were showing up to kick people out of a house whose rent they had faithfully paid on time each month, and they had no idea they were supposed to move. The owners took off with rent money and security deposits and are nowhere to be found.
Teddypig
October 10
11:49 pm
Following Phil Gramm is like playing six degrees of multi-billion dollar tax ripoffs.
delta dupree
October 11
3:04 am
To tell you the truth, I think he’s the shit that got away with the toilet.
Sparky
October 11
12:45 pm
Argh the sheer UGH! I do not have the words! Of all the disgusting useless scum – blame the disaster caused by rich (predominantly) white men in ivory banks on poor minoritieS?!
This was caused by these banks thinking credit was money. This was caused by them throwing out money without even the slightest consideration. This was caused by companies playing a shell game with money, keeping it moving so no-one could see that there wasn’t actually any money there. This was caused by the ROUTINE valuing of intangible assets in high finance (and it continues from stocks to loans) at vastly above their actual value. This was caused by people handing out loans when they should have known better. This was caused by an economic system that has lead to the average inflation-adjusted wage of the working class shrink.
It’s caused by vast companies and banks assuming they are “too big to fail” and that they can do anything with other people’s money, rake in vast profits for the execs no matter what they do. The sad thing, is, they’re right. They’ve got their bailouts. Most of the execs have still got their happy billions and the system will continue as normal until the next bubble, the next overwhelming credit crunch or the next insane way these find-the-queen merchants have found of making the appearance of money by keeping it moving until we’re too dazzled to see how little there actually is
AztecLady
October 25
9:39 pm
Well, it’s not only the Wall Street Journal and the financiers trying to get their nuts out of the fire who are blaming minorities and the Democrats who–how dare they, socialist pigs!–wanted to… hold on, allow me to quote:
and
(Nevermind that Congress was Republican dominated at the time)
Anyone interested can read Orson Scott Card’s rant here.