Posted by
Always To The Right on Thursday, February 19, 2009 2:02:31 AM
From television specials to newspaper editorials, the media are
pushing the idea that current economic problems were caused by the
market and that...
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What was lacking in the housing market, they say, was government
regulation of the market's "greed." That makes great moral melodrama,
but it turns the facts upside down. It was precisely government
intervention that turned a thriving industry into a basket case.
An economist specializing in financial markets gave a glimpse of the
history of housing markets when he said: "Lending money to American
homebuyers had been one of the least risky and most profitable
businesses a bank could engage in for nearly a century."
That was what the market was like before the government intervened.
Like many government interventions, it began small and later grew.
The Community Reinvestment Act of 1977 directed federal regulatory
agencies to "encourage" banks and other lending institutions "to help
meet the credit needs of the local communities in which they are
chartered consistent with the safe and sound operation of such
institutions."
Both HUD and the Department of Justice began bringing lawsuits
against mortgage bankers when a higher percentage of minority
applicants than white applicants were turned down for mortgage loans.
A substantial majority of both black and white mortgage loan
applicants had their loans approved, but a statistical difference was
enough to get a bank sued.
It should also be noted that the same statistical sources from which
data on blacks and whites were obtained usually contained data on
Asian-Americans as well. But those data on Asian-Americans were almost
never mentioned.
Whites were turned down for mortgage loans more often than
Asian-Americans. But saying that would undermine the reasoning on which
the whole moral melodrama and political crusades were based.
Lawsuits were only part of the pressures put on lenders by
government officials. Banks and other lenders are overseen by
regulatory agencies and must go to those agencies for approval of many
business decisions that other businesses make without needing anyone
else's approval.
Government regulators refused to approve such decisions when a
lender was under investigation for not producing satisfactory
statistics on loans to low-income people or minorities.
Under growing pressures from both the Clinton administration and
later the George W. Bush administration, banks began to lower their
lending standards.