Thursday, September 25, 2008

Regulation Play

So what is the cause of our current financial miseries?

How did America wind up in its worst financial crisis in decades? Sen. Barack Obama explained it this way last week: "When sub-prime-mortgage lending took a reckless and unsustainable turn, a patchwork of regulators systematically and deliberately eliminated the regulations protecting the American people."

That's exactly backward. Mortgage lending took that "reckless and unsustainable turn" because of regulation - regulation driven by liberals and progressives, not free-market "deregulators."

Pushed hard by politicians and community activists, the regulators systematically and deliberately altered financially sound lending practices.

The mortgage market was humming along just fine when, in the late 1980s, progressives decided that it needed to be "fixed." Their complaint: Some ethnic groups got approved for mortgages at lower rates than others.

In reality, mortgage lenders were simply being prudent - taking care to provide mortgages to those who could best afford to make the payments.

The shift began in 1989, when Congress amended the Home Mortgage Disclosure Act to force banks to collect racial data on mortgage applicants. By 1991, critics were using that data to paint lenders as racist by showing that minority applicants were approved at far lower rates. Banks were "Shamed By Publicity," as one 1993 New York Times headline put it.

In fact, they found a racial disparity only by ignoring relevant data on applicants' ability to make mortgage payments - such as their assets and credit history.
Hmmmmmm. 1993. Who was President then? That would have been W.J. Clinton. And the Majority party in the Congress? That would have been the Democrats.

We now know why the Congressional Black Caucus was so strongly supportive of the shenanigans at Fannie and Freddie. You know, if this get out it could lead to an unwarranted rise in racism. Especially if Obama loses the election. People are in an ugly mood and looking for people to blame. Me? There were a whole lot of Democrats and not a few Republicans in on the swindle.

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