Posted on 01/15/2008 6:49:54 AM PST by Trailerpark Badass
QUIETLY, behind the scenes, the Clinton Administration is preparing for the biggest regulatory crackdown of recent years. Attorney General Janet Reno is linking up with banking regulators and with HUD Secretary Henry Cisneros to end the supposed epidemic of discrimination against minorities in making home loans. The implications for society at large are ominous.
Here, as in affirmative-action efforts in hiring, college admissions, and the drawing of voting districts, the Washington establishment is obsessed with "disparate impact," which it equates with racism. In the mortgage-lending area, there is ample evidence of disparate impact to feed this obsession. Data collected by the Federal Government reveal that in 1992, while 16 per cent of white applicants for mortgage loans were rejected, 36 per cent of black applicants were rejected.
(Excerpt) Read more at findarticles.com ...
Their desire for racial justice (or for an easy and lasting bump to the economy for which they'd get credit) seems to have led directly to reckless lending, done under threat of lawsuit bolstered by the Justice Dept.
This article is from National Review, Dec. 27, 1993.
Also, the full title, which would not fit, is:
Assault on the mortgage lenders: in the name of racial justice, the Clintonites want the power to decide who gets a home of his own - efforts to impose regulations on banks to make loans even if applicants are not creditworthy
Sorry!
What you say is true, but it isn’t on the radar because it only explains a small part of the mortgage mania.
Sub-prime loans to minorities under special programs (otherwise, those being made certain loans wouldn’t have qualified) are only a fraction of the problem loans.
For that matter, making a home loan is one thing, making a 2nd mortgage on the same home is something else entirely...as would be the making of loans for 2nd and 3rd “investment” properties.
Those subsequent loans can’t be pinned onto the Clinton Administration, and they comprise a pluralty of the problem notes.
...but your point is well made that the news media isn’t giving *any* blame for *any* loans to the Clintons for their assault on banks (re: minority lending) with the Justice Department.
TB, great find and thanks for posting...I was looking for more info re: the Race baiting Demo’s responsibility for lowered credit standards...RICO the whole damn Clinton Administration.
Interesting find from 14+ years ago.
Subprime lending DID exist before this point, BUT it was very limited in scope.
Thanks for posting this. I remember this well and have offered a few postings under the category of IIRC, but haven’t had the link.
I sincerely appreciate this post as it is about the basis of the Liberal horse poop that is the Clinton/Leftist mindset, and representative of the typical good intentions of the Leftist that creates chaos within a functioning system when they tinker with it.
I hope many have the opportunity to read and digest this.
All those have existed for a long time as well - I know people that owned rental properties in the '60s and second mortgages in the '70s.
The difference is that the guidelines weren't as loose.
Not being in the industry, I cannot know for sure, but I would have to think that loosening in some standards, at the behest of the government, would naturally creep into other areas, creating an atmosphere of laxity.
I am actively researching stories like this on the web, after hearing Jesse Jackson call for mortgage relief for minorities.
It just struck me how the political opportunists are so brazen as to try and profit from a disaster they very well may have helped create.
I guess I'm not as jaded as I thought, because that kind of chutzpah is startling to me still.
Community Reinvestment Act, (CRA)
Ask anyone who works for large bank what it requires.
Keep up the good work. I’m certain you will find that most of the disparity problems within our society can be traced to Leftist “good intent”. When their “fix” blows up in OUR faces, they shrug their shoulders and just go on to something else and screw that up.
Creeping standards are a factor, but not the overriding problem.
Banks don’t keep most mortgages “in house” after they make the home loans, remember. A bank will loan all of its money out each month, then it will package those loan notes, sell the packages on Wall Street, and use the procedes from those sales to make new loans next month.
Well, if the loans aren’t in demand, then the bank can’t sell them...and won’t have money to make new loans next month.
So the key is the loan demand on that secondary market.
Banks have to know that “someone” will buy the loans that they make. Lending institutions adjust their behavior based upon feedback from the secondary market that buys loans.
Well, surely the demand from Buyers had to be there for high interest loans (even if the quality was sub-standard).
...and what you will find...if you really dig...is that what changed in the Secondary Markets was that export nations (e.g. China) began using their massive cash surplusses from their trade...to buy exotic, high-paying mortgage loans.
So there was a new Player in the mortgage market...who injected money into the Secondary Markets...for the highest paying mortgage loans (credit quality be hung).
Lending institutions found that they couldn’t write up loans big enough or fast enough or crazy enough to fill this demand (for a while). They adjusted their behavior. They kept pushing the envelope, and the new Players in the Secondary Market kept buying all the loans that they could write.
Recipe for a bubble.
ping
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