Thanks for the ping, aggie21.
Posted on 02/18/2009 6:01:00 AM PST by dbz77
From television specials to newspaper editorials, the media are pushing the idea that current economic problems were caused by the market and that only the government can rescue us.
What was lacking in the housing market, they say, was government regulation of the market's "greed." That makes great moral melodrama, but it turns the facts upside down.
It was precisely government intervention which turned a thriving industry into a basket case.
An economist specializing in financial markets gave a glimpse of the history of housing markets when he said: "Lending money to American homebuyers had been one of the least risky and most profitable businesses a bank could engage in for nearly a century."
That was what the market was like before the government intervened. Like many government interventions, it began small and later grew.
The Community Reinvestment Act of 1977 directed federal regulatory agencies to "encourage" banks and other lending institutions "to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of such institutions."
That sounds pretty innocent and, in fact, it had little effect for more than a decade. However, its premise was that bureaucrats and politicians know where loans should go, better than people who are in the business of making loans.
The real potential of that premise became apparent in the 1990s, when the Department of Housing and Urban Development (HUD) imposed a requirement that mortgage lenders demonstrate with hard data that they were meeting their responsibilities under the Community Reinvestment Act.
What HUD wanted were numbers showing that mortgage loans were being made to low-income and moderate-income people on a scale that HUD expected, even if this required "innovative or flexible" mortgage eligibility standards.
In other words, quotas were imposed-- and if some people didn't meet the standards, then the standards need to be changed.
Both HUD and the Department of Justice began bringing lawsuits against mortgage bakers when a higher percentage of minority applicants than white applicants were turned down for mortgage loans.
A substantial majority of both black and white mortgage loan applicants had their loans approved but a statistical difference was enough to get a bank sued.
It should also be noted that the same statistical sources from which data on blacks and whites were obtained usually contained data on Asian Americans as well. But those data on Asian Americans were almost never mentioned.
Whites were turned down for mortgage loans more often than Asian Americans. But saying that would undermine the reasoning on which the whole moral melodrama and political crusades were based.
Lawsuits were only part of the pressures put on lenders by government officials. Banks and other lenders are overseen by regulatory agencies and must go to those agencies for approval of many business decisions that other businesses make without needing anyone else's approval.
Government regulators refused to approve such decisions when a lender was under investigation for not producing satisfactory statistics on loans to low-income people or minorities.
Under growing pressures from both the Clinton administration and later the George W. Bush administration, banks began to lower their lending standards.
Mortgage loans with no down payment, no income verification and other "creative" financial arrangements abounded. Although this was done under pressures begun in the name of the poor and minorities, people who were neither could also get these mortgage loans.
With mortgage loans widely available to people with questionable prospects of being able to keep up the payments, it was an open invitation to financial disaster.
Those who warned of the dangers had their warnings dismissed. Now, apparently, we need more politicians intervening in more industries, if you believe the politicians and the media.
As it always does.
bump
Sowell Ping
Until Barney Frank and the government managed to screw it up.
An excellent example of how an apparently minor governmental policy shift develops an entrenched advocacy in both consumers and bureaucrats who keep pushing the envelope for increased usage. Thus what started as a 'good thing' of ensuring equality in making mortgage loans creeps into making riskier loans because it became to the benefit of advocacy groups (ACORN), politicians, banks who could sell these loans as securities, Wall Street and finally those semi-governmental obscenities of FannieMae and FreddieMac where salaries and bonuses were based on the amounts loaned. This was not 'Free Market', this was 'Decreed Greed Market' playing with our tax dollars and credit.
OBAMA=IDIOT
SOWELL=GENIUS
Thanks for the ping, aggie21.
An economist specializing in financial markets gave a glimpse of the history of housing markets when he said: "Lending money to American homebuyers had been one of the least risky and most profitable businesses a bank could engage in for nearly a century."
That was what the market was like before the government intervened. Like many government interventions, it began small and later grew."
I am sick of hearing the lies of these people. And the reckless politicians pushing the above, like Bwarney Fwank, not only are going to get off scot free, but had input in the last bill and will have input in future bills supposedly aimed at correcting the pwoblem. Complete and utter insanity.
The Community Reinvestment Act of 1977 ( Jimmah ) and later Clinton expansion needs to be repealed now.
Of course, that will not happen.
Your exactly right!
We’ve got Frank and others own words in the Congressional Record and video clips of them insisting on making loans to people who couldn’t qualify for loans and they and the media ignore it and blame others.
I guess the most distressing thing is the majority of voters believe the lying turkeys.
Absolutely! I always look forward to reading anything by Dr Sowell, as well as Dr Walter Williams. You can just feel the intelligence and education.
Bump to that, George. It’ll never happen!
Well, I’d say that they’ll get away with it if there’s no God. Would you like to pony up a bet on that one?
I meant in THIS Life! They will pay when they stand before almighty God. I’m sure many of us look forward to that day! : )
The only way people like Bwarney Fwank can make it real life, is to lie.
“Both HUD and the Department of Justice began bringing lawsuits against mortgage bakers when a higher percentage of minority applicants than white applicants were turned down for mortgage loans.”
Just like the whining from all the states (liberal, like MD) that too many blacks are in jail/on death row so there must be something wrong with the system and the “white” people running it (never mind the black cops and judges, or least of all victims), and we’re going to sue them all for daring to have more blacks arrested than whites.
“It should also be noted that the same statistical sources from which data on blacks and whites were obtained usually contained data on Asian Americans as well. But those data on Asian Americans were almost never mentioned.”
OH! Big Shock! People who don’t cause problems don’t help promote the “minority victim” scheme.
Orientals (AKA Asian-Americans) - the Un-Minority.
Lord I wish Sowell were president - hell, I wish he had been the candidate!
“You can just feel the intelligence and education.”
AND the courage and “audacity”.
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