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The Great Recession: 'Reparations' Gone Bad
Townhall.com ^ | January 9, 2020 | Larry Elder

Posted on 01/09/2020 5:24:45 AM PST by Kaslin

Some of the Democratic candidates for president support studying reparations to blacks to compensate for slavery. But in many ways, America has made reparations to blacks. What are race-based preferences if not a form of compensation for historical wrongs? Many cities have "set-aside" programs that award government contracts to minority contractors. President Lyndon Johnson pushed his Great Society programs to "end poverty and racial injustice."

But few think of the federal government's housing policy, particularly the Community Reinvestment Act, or the CRA, as a form of reparations. But that is exactly what it was and still is. In many ways, the so-called Great Recession of the late 2000s was a product of affirmative action and a form of reparations gone bad. Really bad.

In 1999, almost a decade before the Great Recession, the libertarian Cato Institute issued a warning about the CRA, which President Jimmy Carter signed in 1977. The CRA was based on the assumption that racist lenders denied mortgages to credit-worthy would-be borrowers, particularly minority applicants. The act initially merely sought data on banking practices to encourage lenders to practice fairness in granting mortgages.

But President Bill Clinton, in 1995, added teeth to the CRA. Economists Stephen Moore and Lawrence Kudlow explained: "Under Clinton's Housing and Urban Development (HUD) secretary, Andrew Cuomo, Community Reinvestment Act regulators gave banks higher ratings for home loans made in 'credit-deprived' areas. Banks were effectively rewarded for throwing out sound underwriting standards and writing loans to those who were at high risk of defaulting. If banks didn't comply with these rules, regulators reined in their ability to expand lending and deposits.

"These new HUD rules lowered down payments from the traditional 20 percent to 3 percent by 1995 and zero down-payments by 2000. What's more, in the Clinton push to issue home loans to lower income borrowers, Fannie Mae and Freddie Mac made a common practice to virtually end credit documentation, low credit scores were disregarded, and income and job history was also thrown aside. The phrase 'subprime' became commonplace. What an understatement."

But is it true that banks were discriminating against minority borrowers?

CATO, in 1999, said despite widespread accusations and lawsuits alleging discriminatory lending, the facts show otherwise. CATO said: "Researchers using the best available data find very little discernible home-mortgage lending discrimination based on area, race, sex or ethnic origin. ...

"Other well-structured studies also found no evidence of redlining or unwarranted geographic discrimination. Thus, the claim that lenders redlined or were biased in making loans for the purchase of homes in central cities is not supported. Nor did the studies find that financial institutions discriminated against actual or potential borrowers on the basis of the racial or ethnic composition of neighborhoods."

What caused this narrative that racist banks refused would-be minority borrowers?

Enter lawyers like then private citizen and attorney Barack Obama. In 1995, Obama, representing 186 blacks, filed a class action mortgage discrimination lawsuit against Citibank. The case was settled, and his clients got mortgages. But, according to the Daily Caller in 2012, just 19 of Obamas 186 clients still had their homes. About half had gone bankrupt and/or had their homes in foreclosure.

Incredibly, at least two of his former clients now believe banks should be prevented from lending to people who otherwise cannot afford their homes. One client said: "If you see some people don't make enough money to afford the mortgage, why should you give them a loan? There should be some type of regulation against giving people loans they can't afford."

Lending standards became so lax that virtually anyone who could fog up a mirror got a home. Then along came the recession, and a lot of people lost homes that they would not have bought in the first place but for lax lending standards. The result? According to the Federal Reserve, from 2010 to 2013, white household median net worth -- a household's assets minus its liabilities -- increased 2.4%. But black net worth fell from $16,600 to $11,000, a four-year drop of 34%. As another of Obama's former clients put it, "(Banks) were too eager to lend money to many who didn't qualify."

In 1999, the Cato policy paper on the CRA made the following recommendation: "The Clinton administration wants an even stricter CRA. But more than two decades of its operation suggest that repealing rather than tightening the act would be the economically and socially responsible thing to do."

Too bad nobody listened.


TOPICS: Culture/Society; Editorial
KEYWORDS: hud; povertypimps; reparations; slavery; undergroundrailroad

1 posted on 01/09/2020 5:24:45 AM PST by Kaslin
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To: Kaslin

Reparations? Hundreds of thousands of americans gave their lives to free the slaves.

That is their reparation. The whole argument today is stupid. Maybe Egypt should pay Israel reparations for that nasty “let my people go” thing that happened a while back.


2 posted on 01/09/2020 5:26:46 AM PST by cuban leaf (The political war playing out in every country now: Globalists vs Nationalists)
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To: Kaslin

At the end of the day, the whole reparations nonsense is just a way to glean a few black votes. It will never, and could never happen. Sane people know this.


3 posted on 01/09/2020 5:27:46 AM PST by cuban leaf (The political war playing out in every country now: Globalists vs Nationalists)
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To: Kaslin

Any of this money only goes to groups like ACORN anyway. New meaning to shovel ready. Shovel ready right into Democratic bank accounts.


4 posted on 01/09/2020 5:29:25 AM PST by Track9 (When the products of liberalism meet you face to face, itÂ’s best to have a loaded weapon.)
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To: Kaslin

The CRA provided the motive, and the financial engineering of securitization provided the means to get these crappy loans bundled, sold to others, and off the banks’ books.

The best, most comprehensive book on the 2008-9 debacle I’ve read is “The Sellout” by Charles Gasparino. The roots of the recession go back many years, and the book reads like a thriller, although its well documented history.


5 posted on 01/09/2020 5:29:45 AM PST by Pearls Before Swine
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To: Kaslin
America has made reparations to blacks?

Americans are "black."

6 posted on 01/09/2020 5:34:09 AM PST by BenLurkin (The above is not a statement of fact. It is either opinion or satire. Or both.)
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To: Kaslin

I’m old enough to recall that the seeds of the Great Recession were planted by a 60 Minutes show on so-called “red-lining”, denying bank loans to low-income borrowers, most in Black areas.
Conservatives warned that those who can’t make payments on loans shouldn’t get them, but when has common sense ever prevailed when votes can be bought?


7 posted on 01/09/2020 5:41:15 AM PST by txrefugee
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To: Kaslin

Here we go again.

The CRA didn’t cause the housing crisis, and neither did “predatory lenders.”

What really happened is that Americans went from a work-hard-save-for-later generation to a buy-now-pay-later generation.

The Fed set the interest rates low, and those buy-now-pay-later people bought more property than they could afford and then kept borrowing against their properties because they thought the values would never stop rising. No one wants to talk about that, though.


8 posted on 01/09/2020 5:56:00 AM PST by Tired of Taxes
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To: Kaslin
Reparations?!?

Around 360,000 Union soldiers died in the Civil War.

9 posted on 01/09/2020 6:24:42 AM PST by JesusIsLord
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To: Kaslin

Tomorrow is my son’s last day, working for a loan processing outfit in Maryland, who handle primarily the Maryland Loan Assistance Program, a program the he say’s in about 95% black applicants. He calls those people who ask about the loan program and he determines if they have a basic shot and sends them along to the loan adjudicators who in turn send out a realtor. He is taking a realtor course in a few weeks to sell real estate... by that time I’m sure he’ll figure out he can take one more course and sell securities.


10 posted on 01/09/2020 6:28:57 AM PST by Jumper
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To: cuban leaf

REPARATIONS FOR SLAVERY? GIVE ME A BREAK!!
https://www.brighteon.com/5842523575001


11 posted on 01/09/2020 6:34:29 AM PST by Dick Bachert (THE DEEP STATE HATES YOU!)
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To: Kaslin
If we gave them anything, it would just make things worse. They'd demand more and more, they'd demand that every new black child born should also get the payment, they'd demand the payments be regular and go on forever, they'd demand that the payments increase for cost of living, it would be a new, permanent tax on everyone else.

Except new immigrants, both legal and illegal, who would undoubtedly be exempt.

12 posted on 01/09/2020 6:42:28 AM PST by A_perfect_lady (The greatest wealth is to live content with little. -Plato)
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To: cuban leaf

Reparations - well the aim should be for uplifting black families to parity.

That was happening in the 50s and 60s. From the 70s it got hit and the reasons we know - welfare “slavery”, a break-down of black families (encouraged by planned parenthood etc.)

To change this now we need a change in culture and a removal of AA to be replaced with better schools in black neighbourhoods and more community action


13 posted on 01/09/2020 7:05:00 AM PST by Cronos (Re-elect President Trump 2020!)
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To: Kaslin

And now there is a housing shortage for low and middle income people because of reduced supply and prices of existing homes are too high.

Builders left those markets because people couldn’t get loans after the collapse.


14 posted on 01/09/2020 7:32:08 AM PST by Moonman62 (Charity comes from wealth.)
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To: Kaslin

Bottom line: So far, how’s it all workin’ out for them?


15 posted on 01/09/2020 7:36:19 AM PST by super7man (Madam Defarge, knitting, knitting, always knitting)
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To: Kaslin
Enter lawyers like then private citizen and attorney Barack Obama. In 1995, Obama, representing 186 blacks, filed a class action mortgage discrimination lawsuit against Citibank. The case was settled, and his clients got mortgages. But, according to the Daily Caller in 2012, just 19 of Obamas 186 clients still had their homes. About half had gone bankrupt and/or had their homes in foreclosure.

This was a class-action vs neighboorhood "redlining" practices, rather than a true person discrimination case. Buycks-Roberson v. Citibank Fed. Sav. Bank

Obama was a token nobody on the plaintiffs' lawyer team.
One of the earlier cases that opened the door to *ahem* creative loans.

so, those that lost their homes after they got relief from the lawsuit, get more reparations ?
16 posted on 01/09/2020 9:34:41 AM PST by stylin19a ((2016 - Best.Election.Of.All.Times.Ever.In.The.History.Of.Ever))
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