Wednesday, October 01, 2008


Excellent post over at Roger's Rules. Hat tip fcal.

Packaging the American Dream.

A home of your own. It’s part of the American dream. Work hard, save up for a down payment, pay your bills on time and, presto, you, too, can buy a home.

For decades the government has done things to help Americans to realize the dream, e.g., graciously allowing citizens to keep some of their own money to help pay for the interest on a mortgage (the official term for this is a “tax deduction,” but I prefer my locution since it emphasizes the fact that it is YOUR MONEY we are talking about).

But what about people who do not work hard (if they work at all)? What about people who have not saved up for a down payment? What about people who do not pay their bills on time (if they pay them at all)? Why shouldn’t they get to live the American dream?

That was the question that led to

“The Community Reinvestment Act” (see here for more).

* The original Community Reinvestment Act was signed into law in 1977 by Jimmy Carter. Its purpose, in a nutshell, was to require banks to provide credit to “under-served populations,” i.e., those with poor credit.

The buzz word was “affordable mortgages,” e.g., mortgages with low teaser-rates, which required the borrower to put no money down, which required the borrower to pay only the interest for a set number of years, etc.

* In 1995, Bill Clinton’s administration made various changes to the CRA, increasing “access to mortgage credit for inner city and distressed rural communities,” i.e., it provided for the securitization, i.e. public underwriting, of what everyone now calls “sub-prime mortgages.”

Bottom line? It forced banks to issue $1 trillion in sub-prime mortgages.

$1 trillion, i.e., a thousand billion dollars in sub-prime,i.e., risky, mortgages, in order to push this latest example of social engineering.

But wait: how did it force banks to do this? Easy. Introduce a federal requirement that banks make the loans or face penalties. As Howard Husock, writing in City Journal way back in 2000 observed: “Bank examiners would use federal home-loan data, broken down by neighborhood, income group, and race, to rate banks on performance. There would be no more A’s for effort. Only results—specific loans, specific levels of service—would count.” Way back in 1994, for example, Barack Obama sued Citibank on behalf of a client who charged that the bank “systematically denied mortgages to African-American applicants and others from minority neighborhoods.”...

I have one small caveat to make. The flurry of links to the CRA the internet offers these days focuses too much, imho, on the impact the granting of loans to "risky minority borrowers" has had, by which obviously the African-American community is meant. While I wholeheartedly agree that a disproportionate percentage of that community indeed consists of people not worth a credit, because whatever passes for their "street culture" (rap, gangs, generally f*cking around) stands in the way of a proper education, strong traditional families, and ultimately success in life, I would wager that by numbers alone bad African-American credit takers can never had such a disastrous impact. AFAIK African Americans make up some 11 per cent of the US population. Make that 10% for easy calculating. I have no stats as to what percentage of these would pose a risk when being handed a loan they possibly can't pay back. But let's assume it's 50% - I guess there's also plenty of African Americans who walk the line and are decent contributing citizens. That would mean a monstrosity like the CRA ultimately only enabled half of one tenth of the US population to get a loan while they were not really creditworthy. I refuse to believe that that small percentage can have gotten the US financial sector in the mess it is now in.

What I DO believe is that the Democrats, by sluicing the CRA through Congress (and amending it to disastrous effect during the Clinton years) they also enabled, apart from "risky" minorities, all kinds of other risky borrowers - be they white, yellow, light brown, red, purple or whatever - to get mortgages they were in fact not entitled to.

Furthermore, don't miss this film:

Hat tip CDR Salamander.

And one final note: a couple of days back, regular reader (if not regular commenter) Adriane linked to this. It is well worth a read. If you are an intelligent person, you will soak it in, appreciate its logic and wonder why the hell it doesn't get the attention it clearly deserves. If you are a blunt IDIOT, you will rather believe a schtoopid cunt like Nancy Pelosi when she shrieks that the current crisis is just another result of George Bush's disastrous economic policy.

As a European who struggles to keep his small company afloat in a toxic environment and who knows that the fruits of his labor are used to import the left's next electorate, I have but one advice to sane, self-respecting and decent Americans:



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