U.S. Housing: A Real Life Bedtime Story (For Adults Only)

There’s a backstory of American housing policy but you won’t hear it from the major media; it doesn’t make their heros look so good. But it’s reality nevertheless.

President Bill Clinton happily signed the 1977 Community Reinvestment Act to clamp down on the biased actions used by mortgage lenders against low-income and especially, black would-be home buyers. The prime target was ‘redlining’ or setting aside entire areas where lenders refused loans or demanded top credit before making them. These were always, low-income areas and affected disproportionate numbers of blacks. Until the government came to rescue them with the new law.

The law set up bank regulators to monitor the banks’ lending, especially in low-income areas and to black and Hispanic borrowers. Banks that didn’t make enough such loans found it difficult to open new branches, complete mergers or acquisitions, etc. The law specified that new low-income lending volume should be the goal but of course, with safety and soundness. Right.

Senator Chris Dodd (D) and his banking committee counterpart in the House, Barney Frank (D) enthusiastically leaned on the regullators who in turn, leaned on the banks for loan volume from poor home buyers; the safety and soundness were left for later. The banks didn’t struggle, they received easy money in fees and resold the loans to loan packagers (derivitives) and to Fannie, Freddie and their ilk, taking some of the risk off their books. And everybody was happy until 2007 when the fact that too many borrowers weren’t repaying their loans became undeniable. Everybody knows what has followed. And of course, everybody will be a long time paying for it.

See, bankers must discriminate or go out of business. Well, or be bailed out by taxpayers. What they discriminate against is people who can’t repay. That’s moral, they’re lending their customers’ money, arent they? Democrats said it was racial discrimination. Too many blacks couldn’t get loans or buy houses and it had to stop. Bankers said it was definitely discrimination but against poor credit, not race. Nobody listened. Full speed ahead towards 2007, Barney and Chris got lots of contributions and ACORN the unforgettable went out into the neighborhoods recruiting borrowers and ‘occupying’ banks, while bringing the regulators in. Yeah, not what you hear from the big news boys and girls, is it…

When too many loans went bad (Congress was shocked! SHOCKED!) came the bailouts with your and your kids’ money. But the bailouts didn’t clean up the mess; too big. So the government and especially, the Fed, changed reporting rules so banks could hide the magnitude of their losses and Fannie/Freddie’s losses and the losses on the bundled derivitives held by others. A lot of the losses are still there, just papered over. And the Fed has dumped tons of electrons it calls money into lenders and insurers while horrendous numbers of bad loan foreclosures have been held off to keep housing prices from sinking further, multiplying all the losses. That’s hanging over our heads, sinking steadily closer to us. The politicians are looking around at ‘green shoots of recovery’ but you notice, they never look up…

Meantime, Europe has also been bailed by the Fed with our money and the arrival of Euro reality is likely closer than that of America. But the two are joined at the hip; whenever one goes, the other will follow because all the banks are in it together these days.

The most impressive part of this is a story from the Los Angeles Times today. The Dems’ anti-redlining, pro-homeownership squeeze on the lenders has done this for U.S. housing:

Homeownership Dips to 15-Year Low

So there’s your bedtime story for tonight: The banks were raped by Congress; they took the famous advice: “When about to be raped, relax and enjoy it” and then, Congress and the Banks together raped the taxpayers, who haven’t noticed yet, but will soon. Pleasant dreams…

About Jack Curtis

Suspicious of government, doubtful of economics, fond of figure skating (but the off-ice part, not so much) Couple of degrees in government, a few medals in figure skating; just reading and suspicion for economics ...
This entry was posted in Affirmative Action, Banks, Congress, Corruption, Democrats, Domestic Policy, Fiscal/Financial Responsibility, Home Ownership, Race and tagged , , , , , . Bookmark the permalink.

2 Responses to U.S. Housing: A Real Life Bedtime Story (For Adults Only)

  1. Annie says:

    “President Bill Clinton happily signed the 1977 Community Reinvestment Act” This is the only statement with which I disagree. It was Jimmy Carter who signed the Community Reinvestment Act in 197; Bill Clinton expanded it when he was in office.

    The American dream, own a home IF YOU CAN AFFORD IT. It’s not the American RIGHT! But, somehow, Carter and Clinton, Dodd and Barney Frank felt that we all have a GOD GIVEN RIGHT TO OWN A HOME:(

    • jackcurtis says:

      Thanks for the chance to shift some of the responsibility from Clinton to Carter!

      And Chris and Barney sure sold the Dream as though God-given but they funded it as taxpayer-given, right?

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