Just So That We're Clear on This

Oh, this financial "pickle" we've found ourselves in. It amazes me how so many people have so many different explanations as to the "how" and "why" of it all, and how many of them get it wrong, facts be damned. Again, many on the right and the left want to politicize this, and the spin is making me dizzy. I hate the party politics because as much as I hate the Democrats, the Republicans are no angels, either, and what really gets me is how party hacks on both sides refuse to admit their own party's mistakes.

In this case, however, despite there being blood on hands from both sides of the aisle, the facts clearly indicate to me that it is the Democrats who have more blood on their hands, namely Barney Frank who said, "THE PRIVATE SECTOR got us into this mess. The government has to get us out of it." Too bad for Barney the facts just don't tell the same story.

Barney Frank's talking points notwithstanding, mortgage lenders didn't wake up one fine day deciding to junk long-held standards of creditworthiness in order to make ill-advised loans to unqualified borrowers. It would be closer to the truth to say they woke up to find the government twisting their arms and demanding that they do so - or else.

The roots of this crisis go back to the Carter administration. That was when government officials, egged on by left-wing activists, began accusing mortgage lenders of racism and "redlining" because urban blacks were being denied mortgages at a higher rate than suburban whites.

The pressure to make more loans to minorities (read: to borrowers with weak credit histories) became relentless. Congress passed the Community Reinvestment Act, empowering regulators to punish banks that failed to "meet the credit needs" of "low-income, minority, and distressed neighborhoods." Lenders responded by loosening their underwriting standards and making increasingly shoddy loans. The two government-chartered mortgage finance firms, Fannie Mae and Freddie Mac, encouraged this "subprime" lending by authorizing ever more "flexible" criteria by which high-risk borrowers could be qualified for home loans, and then buying up the questionable mortgages that ensued.

And here's the bottom line that sums it all up nicely:

All this was justified as a means of increasing homeownership among minorities and the poor. Affirmative-action policies trumped sound business practices.

Read the whole article, please. There are many, many good links to various sources that spell this thing out. If you are a liberal/Democrat/socialist be honest enough with yourselves and your beliefs to admit that your guys got it wrong this time. I know that's asking a lot, but I know there are a few honest liberals out there that can see past their partisanship.

And please review the Gramm-Leach-Bliley Act of 1999, which enabled banks to become "one-stop shops" for all banking, insurance, and investment needs. That is where the Republicans have to own up to their blunders because, while the GLBA opened up competition and did away with a lot of the restrictions of Glass-Steagall, it invited corruption and perhaps stimulated competition where there was really no justification for it. Keeping banking and investment services to consumers separate was probably a good thing.