EnduringSense

“The price of apathy towards public affairs is to be ruled by evil men.” Plato

  • Daily Quote:

    "Intolerance is itself a form of violence and an obstacle to the growth of a true democratic spirit."

    Mahatma Gandh

  • Enter your email address to subscribe to this blog and receive notifications of new posts by email.

    Join 90 other followers

  • Subscribe

  • Advertisements

Government Again Pushing Loans to those than Cannot Afford Them

Posted by Steve Markowitz on May 12, 2011

There are various reasons behind the housing bubble and subsequent collapse that led to the largest financial crisis since the Great Depression.  Those on the Left often focus blame on greed and Wall Street banks.  While these issues played roles in the collapse, the United States government also helped sow the seeds for the meltdown.

Given the Progressives view that government can cure all societal issues, they conveniently ignore the role government played in housing boom and bust.  For example, in 1977 Congress passed and President Jimmy Carter signed the Community Reinvestment Act (CRA).  This Act required banks to make loans and mortgages in all the areas that they serve.  Progressives used this law to further their social goals that included giving more people the ability to obtain mortgages, irrespective of their ability to afford or repay them.

In addition, Congress pressured Fannie Mae and Freddie Mac to lower lending standards in support of the government’s social goals.  This artificially increased the housing demand, as well as housing prices.  Then, when the market went very soft, this guaranteed that many home owners would be underwater and unable to continue paying their mortgages.  This led to a downward spiral of foreclosures and declines in housing prices that continues to this day.

Now the Obama Administration is at it again.  Since the subprime mortgage meltdown, loans to low-income people and those geographic areas in which they reside have substantially decreased.   This is a natural free-market occurrence during a market downturn given that lending institutions tighten up standards.  This is a good thing that helps insure that those who cannot afford mortgages do not get them, especially during a time when housing prices are dropping.  This not only protects banks from making bad loans, but also protects individuals from buying depreciating homes that they cannot afford.

Progrssives, however, do not let economic realities interfere with their social agendas.  As they often do, they explain economic realities in terms of social injustices.  In the case of mortgage lending during the current downturn, they see racism.

Business Week has reported that the Federal Reserve cited Midwest BankCentre of St. Louis, MO for a practice known as “redlining”.  During the depression, the Federal Housing Administration (FHA) drew maps with red ink to delineate neighborhoods considered too risky for lending, often areas with high African-American populations.  Congress has since banned this practice.  Since Midwest BankCentre is located in a white suburb, as they have for 100 years, they have been cited for not issuing home mortgages or opening branches in minority dominated areas.

The Justice Department’s Thomas E. Perez stated the government’s position: “We are using every tool in our arsenal to combat lending discrimination.”  What a lame statement.  Banks are in the business of loaning money and making a profit, period!  They care not who the money goes to or what color their skin might be.

We are not even three years post the economic implosion caused by subprime mortgage mess, a problem caused in part by the government’s meddling in the economy to promote social programs.  The housing market is still in a tailspin with prices dropping.  Now, the Obama Administration is once again meddling in the housing market to promote the same social agenda.  Repeating the same failed policies and expecting defect results is truly insanity.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

 
%d bloggers like this: