The CRA: Its a Racial Thing . . .
Georgetown University's legal and finance scholar Emma Coleman Jordan, and Bill Moyers look at the noise machine, which seems to be operating at full tilt:
BILL MOYERS: There've been a lot of voices on cable channels recently blaming this bubble, this crisis, the cause of all of this catastrophe we're in right now, on poor people who took out mortgages that they couldn't afford to buy home they wanted. They shouldn't have. Watch these clippings and tell me what you think about them.
LAURA INGRAHAM: 1995 when Bill Clinton decided to tell, you know, Robert Rubin to rewrite the rules that govern the Community Reinvestment Act and push all these institutions to lend to minority communities, many very risky loans, that was a noble idea, perhaps, but that certainly wasn't following free-market principles.
NEIL CAVUTO: I don`t remember a clarion call that said, Fannie and Freddie are a disaster. Loaning to minorities and risky folks is a disaster.
LARRY KUDLOW: It's time for the Congress, Republicans and Democrats, to stop encouraging, exhorting, and forcing banks to make low income loans with no documentation. Stop that. The community reinvestment act which was passed in the mid nineties, which was extended in the early 2000s, literally pushed these lenders to make low income loans.
BILL MOYERS: Lending to minorities and risky people. Do you see this, are they seeing this as issues of race and class?
EMMA COLEMAN JORDAN: Absolutely. And it's a cynical manipulation. It's reprehensible. And, in the worse tradition of Lee Atwater and the Willie Horton ad, to use race as a wedge issue to make people who pay their mortgages believe that the people who are getting the benefit of the 700 billion dollars, that we're being asked to pay, are poor, minority people who caused the crisis.
This is unconscionable. This problem is not a problem that was caused by the Community Reinvestment Act. The data is very clear that the Community Reinvestment Act loans were being offered in a way to people that were much more responsible and had none of the characteristics of default that are being attributed in this discussion. And what this does is to say, this problem is a problem that was caused by black people.
And it means that it gives an opportunity to bring up that old wedge. But I think the people in the country are smarter today. I just don't think it's going to fly. I think that people understand that the enemy is not a person who got a home loan and was tricked into getting that loan by a fast-talking broker who originated the loan but that the problem was the securitization process, the high leveraging that Wall Street was doing, the lack of regulation.
Click for video:
>
Source:
Emma Coleman Jordan
October 3, 2008
http://www.pbs.org/moyers/journal/10032008/watch2.html
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Thanks for speaking up about this, Barry.
Posted by: STS | Oct 4, 2008 12:08:28 PM
It is literally the old bait and switch. "Hey, what's that over there?" when the bankers are being recapped with our money. I have no earthly idea what Obama believes in but I decided yesterday to vote for him. Biden might be a moron and yes I know Dodd and Frank are bought and paid for, but it is better than a kleptocracy. And yes, I know my taxes will be going up. Hopefully one of the parties implodes and we get a true libertarian/conservative party.
Posted by: Thomas | Oct 4, 2008 12:18:16 PM
Yes, thank you, Barry.
I find it despicable that certain segments of our society are allowed to constantly denigrate those that have absolutely no power for problems that were caused by these very same segments, the rich and powerful. Someone should drop Neil Cavuto off in South Central without a dollar to his name and see if he's singing a different tune a year later. They're all a bunch of fat, lying, do-nothing frauds.
Posted by: OhNoNotAgain | Oct 4, 2008 12:20:33 PM
Gasparino got you going about this, Emotions are a bit thin these days...
we are getting there, no worries
Posted by: Eric Davis | Oct 4, 2008 12:21:11 PM
I know that it is the "rushies", the wingnuts, saying this - but it still makes me crazy.
This, in yesterday's nytimes was chilling - and I wish more congresspeople had read it before they voted.
"They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments.
The five investment banks led the charge, including Goldman Sachs, which was headed by Henry M. Paulson Jr. Two years later, he left to become Treasury secretary. "
...
"At Bear Stearns, the leverage ratio — a measurement of how much the firm was borrowing compared to its total assets — rose sharply, to 33 to 1. In other words, for every dollar in equity, it had $33 of debt. The ratios at the other firms also rose significantly."
http://www.nytimes.com/2008/10/03/business/03sec.html?_r=1&em=&adxnnl=1&oref=slogin&adxnnlx=1223137617-agNBNZF4HCHac4EdLBh7LA
So the SEC didn't do its job after this dramatic change to the rules in 2004 - and Paulson was involved. How shocking - sadly not so shocking.
Posted by: ap | Oct 4, 2008 12:25:29 PM
'the noise machine, which seems to be operating at full tilt...'
the noise machine is broadcasting in stereo.
Posted by: Jay | Oct 4, 2008 12:25:36 PM
Barry,
These claims are, at the core, racist. They are also denial by the people who caused the problem and cannot admit it.
Your Oct 2 post "Misunderstanding..." is the best debunking of these claims that I have seen.
Posted by: wally | Oct 4, 2008 12:26:32 PM
This CRA meme has really found some traction among the wingnut contingent. Anything to divert attention from the real issues. Certainly makes sense that forcing fine upstanding banks to lend to colored folks explains why Phoenix, Las Vegas and Miami are ground zero for the credit meltdown. Data free analysis they call it in B school.
And it only further demonstrates what a total tool Larry Kudlow is.
Posted by: martin | Oct 4, 2008 12:30:12 PM
Thomas,
I agreee there has never been a more critical time for a viable 3rd Party to rise up and save us from ourselves.
There are too many good people at the bottom of the right and top of the left who have no voice in what is happening in this Country.
This group is the real backbone of this Country and do not have a candidate in this election that has any chance of winning.
I have decided to vote for Ron Paul. He makes more sense than anyone else; but, I know he can't win. I don't think I could live with myself knowing I voted for Obama or McCain. I have real problems with both of them.
How do we wind up here? Where is our candidate? I love this Country; but, damn! I just don't know anymore....
Posted by: BG | Oct 4, 2008 12:32:57 PM
Sorry, I'm not racist - I don't fulfill that stereotype. But, the loosening of lending standards was certainly part of the problem.
Posted by: Kelja | Oct 4, 2008 12:33:05 PM
Thank you Barry for staying on this.
An exceedingly large number of college educated whites, both male and female, have bought into the lie that the CRA is one of the primary sources of our financial problems. These are people who should know better, but are unaware of their own racial biases - and how readily these biases are manipulated by Bill O and Rush, et al. That or they are straight up racists.
This is a signal moment to discredit the right's covert racism. I understand there is pressure on Paulson to speak up on this issue.
I mentioned this previously, but executive directors of various state mortgage broker associations have been mass emailing their membership variations on this outrageous racist smear. They need to be exposed for their racist hypocrisy.
Posted by: disgusted mortgage broker | Oct 4, 2008 12:38:18 PM
I received an email from a local kook, Frank Simon, with a letter explaining how the CRA is totally at fault and asking me to send it to everyone I know.
He's always on some moral campaign and it's intent is always to misdirect blame and then demand punishment. These are the kinds of people that rally round the neocons. They aren't part of the insider club so I'm sure why they do it unless it's because they share the same hate.
Regardless, the real perps are scared right now and rightly so. I suspect in the end most of them will be revealed and dealt with harshly. Others associated somehow but not at fault probably will be too.
Posted by: Jerry | Oct 4, 2008 12:43:34 PM
"But, the loosening of lending standards was certainly part of the problem."
The CRA has absolutely nothing to do with the loosening of lending standards. Have you not even read Barry's posts for the past two weeks, or are you just being purposefully ignorant ?
Posted by: OhNoNotAgain | Oct 4, 2008 12:44:56 PM
"But I think the people in the country are smarter today. I just don't think it's going to fly."
I spoke to my dad on Wednesday night and we got talking about the bailout plan and he brought up CRA as one of the main causes of this mess. He's a smart man, but I can't help feeling that the pundocracy can really steer people's understanding of the situation. I hope Emma is right...
Thanks, Barry, for this post (as well as the CRA debunk a couple of days ago)
Posted by: BustaMove | Oct 4, 2008 12:45:31 PM
"They aren't part of the insider club so I'm sure why they do it unless it's because they share the same hate."
This really puzzles me also. They seem to really believe in some sort of kinship with the people peddling this filth. It's really just ignorant beyond all comprehension. These people that they admire and look up to would throw them under the bus as soon as it was convenient for them.
Posted by: OhNoNotAgain | Oct 4, 2008 12:49:27 PM
The real risky behavior is when every cracker and their brother get into 'flipping'for fun and quick profit. Instinct tells me that makes up a bigger factor in mortgage security failures than any govt. program.
Where there have been minroity loan failures, a large share have been where fast talking mortgage brokers steer people into loans that are not client suited, but broker enriching. There has not been a boom in recorded history where the slick and the fast talkers did not take advantage of anyone they could, and then blame the victims to boot.
Posted by: TulsaTime | Oct 4, 2008 12:59:38 PM
"But, the loosening of lending standards was certainly part of the problem."
the loans that the CRA were responsible for were made by banks, and are all performing.
the loans that are blowing up were made by non-bank institutions who were *not* under the CRA purview.
Posted by: m3 | Oct 4, 2008 1:03:15 PM
I watched the interview. And though I agree with some of Ms. Jordon's views, most of it is bullshit!
Social Engineering more than anything else, lead to this ponzi scheme. Ms. Jordan actually made the comment that the poor didn't have "access to home equity, as a cushion against economic misfortune".
~~~
BR: Go see this:
http://bigpicture.typepad.com/comments/2008/10/federal-reserve.html
Posted by: Sick and Tired | Oct 4, 2008 1:05:19 PM
Welcome to the decline of the American empire...it only gets worse from here on out.
Posted by: Josh | Oct 4, 2008 1:05:38 PM
further, this blind right wing fundamentalist ideology needs to stop.
it's literally destroying the country. these guys have done far more damage than bin laden ever could.
the levels of delusion that some of these guys show is incredible.
Posted by: m3 | Oct 4, 2008 1:08:18 PM
Reality to right wingnuts:
If Clintons pressuring the banks to make loans back in the late 90’ies is the cause, then why are all the defaulting loans wintage 2004-07 (a time when nobody had received a nasty letter from regulators about making more minority loans in several years)?
Or is it the usual thing that the neoconmen creates their own reality, if the one everybody else lives in does not confirm their ideology and racism.
Posted by: DeDude | Oct 4, 2008 1:13:53 PM
What STS and others have said: The entire right-wing, "it's all CRA/Frannie/Dems fault" utterly fails to stand up to close scrutiny.
But it's not just false, it's a big lie, and this needs to be addressed too because those kinds of lies have a life of their own, tapping into dangerous territory within a heartbeat; e.g., Timothy McVeigh was not clinically insane nor even an overt Neo-Nazi, in his own mind he was a warrior for justice.
Now clearly even as a spurious claim the CRA et al story serves a number of useful purposes for the neo-cons and Republicans generally:
1. The lie obscures the rather straightforward logical conclusion that low regulation and trickle down polices not only doesn't work as advertised but may be actively injurious to the economy (combined with crony capitalism such policies could even prove lethal);
2. it also obscures or distorts the historical record and misrepresents the way the economy works and that's not good for either a citizen or an investor - those who forget the past are doomed to repeat it and those who ignore the laws of supply and demand are going to lose a lot of money.
However hooking into the cultural history of the United States elevates this to the Big Lie status since:
3. It resuscitates the Southern Strategy with a new set of code words for colored people, the impoverished, Democrats or other perceived enemies; e.g., mortgage scammer is the the new welfare queen.
4. And since Obama is black as well as a Democrat and was raised somewhat poor to boot (single mom on food stamps, student loans, etc) it allows a multiple level attack that can avoid overt bigotry while busily plucking all the racist and classist chords there are.
I would not expect someone as obtuse as Neil Cavuto or as hidebound as Larry Kudlow to actually recognize the nature of their participation in this and suspect they might even be genuinely shocked or angered if accused but you can bet that all Karl Rove's proteges, Steve Schmidt in particular, know exactly what is going on and how it will be used.
Politics is a contact sport, not for sissies, but there are genuine policy disagreements that need to be addressed, a country that needs a better quality of governance than it has recently experienced, and Big Lies can seriously damage our ability or even our willingness to argue with those who disagree: This is not a good thing regardless of ones preferred candidate.
Posted by: RW | Oct 4, 2008 1:14:24 PM
http://au.youtube.com/watch?v=_MGT_cSi7Rs
clarion call, perhaps?
~~~
BR: Jack, Fannie/Freddie were definitely part of the entire machinery -- corrupt and incompetent to say the least -- but they were a modest factor, and had nothing to do with abdicating traditional lending standards.
Don't miss the forest for the trees . . .
Posted by: Jack | Oct 4, 2008 1:15:16 PM
Barry,
Thanks so much for posting this. It was a fantastic interview.
A few days ago, I tried to add in your comments area an absurd quote from James "Rev Shark" DePorre, which blamed the crisis on early Clinton Administration efforts to end loan discrimination. The comment was blocked because I said something like, "Rev's post could have been titled 'Blame the Black-Loving Liberals'," except I didn't use the word 'black'. Sometimes subtly and perhaps unwittingly, as in Rev's case, and sometimes not, as on the Rush L show, the housing debacle has been turned by the right polemicists into a white rage target.
Posted by: Daniel Kwiat | Oct 4, 2008 1:20:04 PM
Calling it racism is in itself a diversion tactic. MLK was not killed until he progressed from speaking of racial injustice and began to point out the real issue of economic oppression. He was in memphis in support of poor people, not blacks. There has been a war of rich vs. poor in this country for over 100 years now, and it's the only real war we've really had for the past 50 years. Keeping the poor poor, and making sure there are plenty of them to exploit, has been a major right-wing agenda for that entire time. Letting minorities think that it's their skin color keeps everybody looking the other way. There may be isolated individuals who look at skin color, but major policies are formed based on wallet thickness.
Posted by: David | Oct 4, 2008 1:20:13 PM
