Tuesday, 3 March 2009

Victims of an agenda

Many of you will have read recent protestations made by politicians, and high ranking individuals in the finance industry, insisting that there is no connection between the Community Reinvestment Act, a piece of US government legislation which primarily required lending institutions to extend credit to minority and immigrant groups and people with poor or non existent credit ratings, and the current global financial crisis, a phenomenon originating initially from the USA and caused primarily by extending lending to minority and immigrant groups and people with poor or non-existent credit ratings.

I have written about this before, however, as with the wider media, it seems there is a widespread desire to pin the blame for the situation we are now in on those convenient greedy, rich, bankers, and, for some, to applaud the gesture politics of our leaders when they announce that they will curb the earnings of the captains of Industry or claw back legally agreed pension arrangements, as if this will have any impact whatsoever on the enormity of the challenge facing us.

I, however, take the view that, although many bankers and financiers are guilty, their crimes amount mainly to playing money launderers to the real criminals, namely agenda driven politicians intent on social engineering.

Bill Anderson at Lew Rockwell has made a fascinating discovery in the form of an article published in the New York Times in September 1999, the following exert from which, I hope he will not mind me quoting in full:
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits. (emphasis mine)

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called sub prime market.''

As Bill says in his posting, isn't it strange how smart people can forget stuff so easily?.

I know I am still in a minority in not heaping all the blame on the greedy bankers, but my guess is that in years to come, historians and economist will admit that what we are living through today, was not caused by speculators, loan sharks and bankers, nut by politicians with an agenda.

Note: If you agree with Bill's article "Fannie's Smoking Gun" or think it deserves wider readership, please forward it on.

Alternatively, if you are a digger, you can DIG it by clicking here


Dr.D said...

This is a really tangled story, and you have only told a part of it here, Sarah.

When the CRA was first passed and beginning to be enforced, there were bankers with common sense and integrity who knew this was not going to work, and they resisted. If they represented a large bank, one of the "community organizer" groups (where have we heard that term) such as ACORN would sue the bank alleging discriminatory lending practices. These suits were quite successful, and the banks quickly learned to settle and to avoid them by following CRA. For smaller banks, they simply found themselves regulated to death. Their requests for permission to perform various routine operations were either delayed or denied. In particular, they would be denied the opportunity to merge to form bigger, more competitive banks. If they could not grow, they were at a disadvantage in competing for major customers and for hiring bright people. They also became prime targets for hostile takeovers in which a hostile, outsider "buys" the bank and then uses bank assets to pay for the the purchase. In short, it has been a very tricky business being a banker in the US for the past 25 years.

These subprime loans were a huge disservice to the people who received them. It took whatever money they had that they could use for a down payment, and now they will quite likely loose that, the payments they have made, and the homes. I personally am strongly opposed to the idea of the bailout being used to payoff the mortgages of these people who should have never received a mortgage in the first place. It makes a mockery of the whole idea of working to pay for a home, as I and countless others have done over the years. It must not be allowed to stand.

Sarah Maid of Albion said...

I am sure that you are right and there was much more to it, but, throughout, the people driving the agenda were the politicians.

The Hunter said...

Dr. D brings up a good point; some of those mortgage recipients didn't even have social security numbers. I wonder if I could get a loan without a social security number?

But I am not aware of any bailout money going to pay for these people's mortgages. As far as I know, they are being kicked out of the houses that they couldn't really afford, just like was described 100 years ago in Upton Sinclair's The Jungle. Did I miss something?

The politicians are doing, while they are on the public payroll and therefore able, what they need to for their rich buddies who promise to take care of them later on. And, those buddies have to take care of these politicians as they retire, as an example to the ones that are coming up through the ranks.

Sarah, keep digging -- really digging. You're going to come up with more than just foolish affirmative action in lending. There's a real power play going on behind the scenes. Why did "Change we can believe in" Obama so quickly jump on to W's bailout plan? And, why did Mr Straight Talk Express cave in, when that was a perfect opportunity to energize his Republican base?

Money travels -- follow it.