Thursday, April 09, 2009

Whose 'irresponsibility,' Mr. President? ~ By Jack Cashill

By Jack Cashill © 2009 "We've just emerged from an era marked by irresponsibility," President Obama told those students in Strasbourg, France, not at the moment burning down hotels and border posts. Left unsaid, of course, was just whose "irresponsibility" caused the financial crisis to which the president was alluding. Based on his bumbling dissection of the presumed cause – a "mismatch between the regulatory regimes that were in place and, er, the highly integrated, er, global capital markets that have emerged" – I am not sure Obama knows. It would help if he did. A September 1999 New York Times article offers a useful, if unlikely, place for our president to jumpstart his education. The article blithely cheers on the work of the Fannie Mae Corporation, then in the process of prodding banks to provide mortgages to those whose credit was "not good enough to qualify for conventional loans." The article leaves the oddball impression that the lenders begged to be prodded. Banks, the Times tells us, were "pressing Fannie Mae to help them make more loans to so-called sub-prime borrowers." Only as seen through the looking glass of the diversity movement does this account make any sense at all. In the world before diversity, banks were in business to make money. They and other lenders shied from lending to sub-prime borrowers of any race, creed, color, gender, or orientation. For the record, "sub-prime" refers not to a kind of loan, but to a kind of borrower, those who cannot afford to cover either the traditional 20 percent down payment, a monthly nut less than 28 percent of their income, or, most likely, both. So why did lenders now want to get into the sub-prime business? The Times alludes to the answer. Fannie Mae, it seems, had been "under increasing pressure from the Clinton administration to expand mortgage loans among low and moderate income people." The lenders faced the same pressure. Clinton's primary extortion tool was the Community Reinvestment Act. Signed into law by Jimmy Carter in 1977, the Clinton administration loaded up the previously benign CRA with real firepower in 1995. [Continue reading]
digg story

No comments:

Post a Comment