Showing posts sorted by relevance for query community reinvestment act. Sort by date Show all posts
Showing posts sorted by relevance for query community reinvestment act. Sort by date Show all posts

Saturday, April 26, 2014

Last Call For The Zombie CRA Lie

The jokers over at Investors' Business Daily ("When the Wall Street Journal is too liberal a source for your economics news") will keep flogging the ridiculous zombie lie that Bill Clinton created the subprime mortgage collapse through the Community Reinvestment Act.  Now that Hillary Clinton's future plans are making news, they've turned up the heat on this stale, overcooked lie.

Newly released memos from the Clinton presidential library reveal evidence the government had a big hand in the housing crisis. The worst actors were in the White House, not on Wall Street.

During the 1990s, former Clinton aides bragged that more aggressive enforcement of the Community Reinvestment Act pressured banks to issue riskier mortgages, lending more proof the anti-redlining law fueled the crisis.

A 2012 National Bureau of Economic Research study found "that adherence to that act led to riskier lending by banks," with "a clear pattern of increased defaults for loans made by these banks in quarters around the (CRA) exam, (and) the effects are larger for loans made within CRA tracts," or low-income and minority areas.

To satisfy CRA examiners, Clinton mandated "flexible" lending by large banks. As a result, CRA-approved loans defaulted about 15% more often, the NBER found.

Exhibit A in the 7,000-page Clinton Library document dump is a 1999 memo to him from his treasury secretary, Robert Rubin.

"Public disclosure of CRA ratings, together with the changes made by the regulators under your leadership, have significantly contributed to ... financial institutions ... meeting the needs of low- and moderate-income communities and minorities," Rubin gushed. "Since 1993, the number of home mortgage loans to African Americans increased by 58%, to Hispanics by 62% and to low- and moderate-income borrowers by 38%, well above the overall market increase.

"Since 1992, nonprofit community organizations estimate that the private sector has pledged over $1 trillion in loans and investment under CRA."

And since minorities are all broke ass welfare cheats, Wall Street was "forced" to loan good money to those people and that's what destroyed our economy.   There's only one problem with this:  it's a lie that's been pushed by IBD for six years now.  I caught them doing it in November 2008.  They're still doing it now and the same rebuttal applies:

It's pretty idiotic, and any serious person rejects the argument that the CRA forced the banks into making loans they couldn't pay...including the lenders themselves.

But IBD plunges on into the darkness, admitting that even though Countrywide, the largest single subprime lender in America, was not covered under the CRA, it still "came under great pressure to loan to minorities".

No, it came under the pressure of its own greed.

And let's not forget banks like Citigroup that didn't make subprime loans at all, but still collapsed under the weight of their own bad investments they made by choice and had to be rescued with our money.

I said the same thing in December 2012 as well:

And I've killed this lie again, and again, and again, and again, and again, and again, and again.
 
Once again, the mortgage brokers that made nearly all of the subprime loans that went bad were MORTGAGE BROKERS and NOT BANKS.   Because they WERE NOT BANKS, they were NOT SUBJECT TO THE COMMUNITY REINVESTMENT ACT AT ALL.

And I will keep killing this lie that black people and Bill Clinton caused the goddamn financial meltdown every single time.

Sunday, December 23, 2012

Last Call

My favorite Zombie Lie of the housing collapse is back again, Broke Ass Black People Caused The Recession.  Every six months or so we get another iteration of this idiocy that centers around the Community Reinvestment Act, which because of "racial quotas" forced banks to make subprime loans to unqualified brown people, which collapsed the housing sector and the economy.  No surprise, it's Investor's Business Daily again with this lie.

Democrats and the media insist the Community Reinvestment Act, the anti-redlining law beefed up by President Clinton, had nothing to do with the subprime mortgage crisis and recession.

But a new study by the respected National Bureau of Economic Research finds, "Yes, it did. We find that adherence to that act led to riskier lending by banks."

Added NBER: "There is a clear pattern of increased defaults for loans made by these banks in quarters around the (CRA) exam. Moreover, the effects are larger for loans made within CRA tracts," or predominantly low-income and minority areas."

Except as I've been saying for years now, the CRA's effect on the housing collapse was minimal because the banks that made the vast majority of bad subprime loans never made them under the CRA.  Investor's Business Daily has been pushing this outright falsehood for four years now.
 
And I've killed this lie again, and again, and again, and again, and again, and again, and again.
 
Once again, the mortgage brokers that made nearly all of the subprime loans that went bad were MORTGAGE BROKERS and NOT BANKS.   Because they WERE NOT BANKS, they were NOT SUBJECT TO THE COMMUNITY REINVESTMENT ACT AT ALL.

This "study" doesn't prove anything, other than Investor's Business Daily is the NewsMax of the financial world.

Tuesday, March 17, 2009

The Most Breathtakingly Racist Logical Fallacy In The Last Week Or So

It belongs to My Second Favorite Village Idiot, US News's Jim Pethokoukis. His thesis? N*gga Stole My Economy.
There has been a lot of push back against the idea that the Community Reinvestment Act nudged banks to give mortgages to people who should have not gotten them. But then here comes this fantastic story, courtesy of the Boston Business Journal, about East Bridgewater Savings in Boston:

Bad or delinquent loans? Zero. Foreclosures? None. Money set aside in 2008 for anticipated loan losses? Nothing. ... The bank even squeaked out a profit of $87,000. And its Tier 1 risk-based capital ratio was 31.6 percent, or more than three times higher than many community banks in Massachusetts. “We’re paranoid about credit quality,” Petrucelli said. The 62-year-old chief executive has run the bank since 1992.

Yet the FDIC has turned up the heat on Petrucelli's bank, giving it an apparently rare "needs to improve rating," for not making more risky loans under the Community Reinvestment Act. Here is how the FDIC puts it: “There are no apparent financial or legal impediments that would limit the bank’s ability to help meet the credit needs of its assessment area. The FDIC examiners also faulted East Bridgewater "for not advertising and marketing its loan products enough. The bank, which does not have a Web site, offers fixed-rate mortgages."

Let me spell Jim's fantasy out for you.

  1. The collapse of the housing market destroyed the economy.
  2. The housing market collpased due to subprime loans going bad.
  3. The CRA (Community Reinvestment Act) forced more loans to be created and given to minorities.
  4. Jim found a bank that didn't meet CRA standards.
  5. This bank didn't have any bad loans, which proves CRA caused bad loans.
  6. Therefore, any bank that did meet CRA standards had to have made bad loans.
  7. Therefore, the CRA forced banks to make bad loans or face punishment under the CRA.
  8. Most banks chose to make loans to minorities to meet CRA standards.
  9. To do that, they had to make subprime loans to minorities that were bad loans.
  10. Therefore, all minorities are poor and cannot afford a home.
  11. Therefore, the subprime market collapsed and it's the fault of poor minorities, not banks.
  12. The CFA and broke ass minorities wrecked the economy.
Now, considering everything after 2 becomes a logical fallacy due to the fact that banks pushed subprime loans and refinance options with ridiculous terms to as many Americans as possible in order to make as much money as possible (it was okay if they foreclosed on a subprime loan once in a while, as the house they got when they foreclosed was increasing in value) and the fact that subprime loans only became possible after Alan Greenspan's easy credit bubble, we have Jimmy here basically blaming the victims.

It's repugnant, really. We're supposed to believe that while the fnancial industry was screaming REFI NOW! HISTORICALLY LOW RATES! and making NINJA loans to anyone they could find without following up on them, that the Feds held a gun to their head while doing so.

They knew what they were doing. Preying on people and calling it "the ownership society".

[UPDATE] Or as Gavin at Sadly, No! puts Jim's bullshit:
I’m not saying that a fanciful what-if scenario that I built atop a flimsy anecdote refutes all the actual data, but to let the actual data run around unchecked is ridiculous.
Yep.

Tuesday, November 10, 2009

The Kroog Versus Dick Armey

I've been fighting the stupid, ignorant right wing racist smear that poor minorities caused the meltdown because of the Community Reinvestment Act for the better part of a year now. Paul Krugman catches Dick Armey not only using the smear again, but building off the lie to say that poor minorities will also be the cause of the next meltdown because of Obamacare.

In the midst of a seriously disgusting interview with Dick Armey, the former House majority leader offers his analysis of the financial crisis:

But at what point do we allow the government to order people that you must sell your product to this person or that person, irrespective of any good judgment? We saw what happened in housing when they ordered banks to make loans to people who weren’t qualified. Are we now going to have the same destructive influences in health care because we’re going to order doctors to provide services and so forth?

There’s a persistent delusion, on the part of many pundits, to the effect that we’re actually having a rational political discussion in this country. But we aren’t. The proposition that the Community Reinvestment Act caused all the bad stuff, because government forced helpless bankers into lending to Those People, has been refuted up, down, and sideways. The vast bulk of subprime lending came from institutions not subject to the CRA. Commercial real estate lending, which was mainly lending to rich white developers, not you-know-who, is in much worse shape than subprime home lending. Etc., etc.
But it doesn't matter, because anytime somebody points out Dick Armey's rich friends trashed our economy through the securitization of mortgage loans that were given out through greed and wishful thinking, folks like Armey will turn around and say "Well if the people we gave loans to weren't so goddamn poor and paid us back, you'd have your nice economy. The Dirth F'ckin Hippies made us make those bad loans."

As I said a year ago:
But gosh, it sure is fun to blame Democrats, poor black folk, and the Community Reinvestment Act for the crisis, and to rewrite history and pretend banksters were all forced to make billions in bad loans to people they knew that were broke instead of admitting a huge pecentage of folks given loans under the CFA -- minorities -- were in fact in much better financial shape than the average subprime borrower.
Still doesn't matter to assholes like Dick Armey, however. The "poor minorities broke the global economy" lie will never die as long as people refuse to correct it.

Sunday, November 30, 2008

Hole-Digging In Opposite Land

The far right Investor's Business Daily still refuses to give up their pipe dream on what caused the financial crisis: Bill Clinton, poor black people, and too much regulation.
The Community Reinvestment Act is to blame for the financial crisis, but it so powerfully serves Democrats' interests that they'll do anything to protect it — including revising history.

The CRA coerces banks into making loans based on political correctness, and little else, to people who can't afford them. Enforced like never before by the Clinton administration, the regulation destroyed credit standards across the mortgage industry, created the subprime market, and caused the housing bubble that has now burst and left us with the worst housing and banking crises since the Great Depression.

The CRA should be abolished, along with the government-sponsored enterprises that fueled the secondary market for subprimes — under pressure from Clinton, who ordered HUD to set quotas for "affirmative action" lending at Fannie Mae and Freddie Mac.

But powerful Democrats in Washington want to protect the act — along with Fannie and Freddie — and spin the subprime scandal as the result of too little regulation, not too much.

"Repealing or weakening the CRA would be a mistake," warns Senate Banking Committee Chairman Chris Dodd, D-Conn., who argues that the CRA should be strengthened.

Dodd, the top recipient of Fannie donations and himself a beneficiary of a sweetheart mortgage brokered by a subprime lender, recently invited one of Clinton's top enforcers of the CRA to testify.

"The notion that CRA has caused this problem is a pernicious thought," said former Comptroller of the Currency Gene Ludwig. "These are not truthful statements. The CRA has helped to create a better and sounder world for finance, not the opposite."

Dead wrong. But the mainstream media believe it, and have attacked those, including this paper, who dare to tell the truth about the crisis. Already the debacle has erased $13 trillion in wealth, while putting taxpayers on the hook for up to $8 trillion in bailouts.

It's amusing then that a rule Clinton "viciously enforced" in 1994 caused housing prices to collapse in 2006...12 years later.

Dirt cheap credit after Alan Greenspan cut interest rates to one percent in 2004 and 2005, massive bank and investment house mergers after Gramm-Leach-Bliley was passed in 1999, a torrent of greed in the financial sector and a stock market forming an unsustainable bubble economy due to even fewer regulations in turning subprime loans into securities all of course had nothing to do with it. Banks became greedy and played the markets, riding a huge bubble elevator on the way up that had nowhere to go but down this year.

So much of the financial sector's assets are now tied up in "off-balance sheet investment vehicles" that the banks themselves are largely insolvent. They all played the game. They all lost. They are now all being bailed out.

But gosh, it sure is fun to blame Democrats, poor black folk, and the Community Reinvestment Act for the crisis, and to rewrite history and pretend banksters were all forced to make billions in bad loans to people they knew that were broke instead of admitting a huge pecentage of folks given loans under the CFA -- minorities -- were in fact in much better financial shape than the average subprime borrower.

The article finishes up with facts that supposedly damn Clinton and poor ass negroes as the cause of wiping out $20 trillion of American wealth, facts like "Nearly 4 in 10 subprime loans between 2004 and 2007 were made by CRA-covered banks such as Washington Mutual and IndyMac. And that doesn't include loans made by subprime lenders owned by banks, which were in effect covered by the CRA."

Of course that leaves out the fact that these large mortgage lenders were covered under CRA because they were large mortgage lenders in the first place and being large lenders they made lots of subprime loans in order to make money and then bundle the risk into securitized vehicles, putting them off the balance sheets.

It's pretty idiotic, and any serious person rejects the argument that the CRA forced the banks into making loans they couldn't pay...including the lenders themselves.

But IBD plunges on into the darkness, admitting that even though Countrywide, the largest single subprime lender in America, was not covered under the CRA, it still "came under great pressure to loan to minorities".

No, it came under the pressure of its own greed.

And let's not forget banks like Citigroup that didn't make subprime loans at all, but still collapsed under the weight of their own bad investments they made by choice and had to be rescued with our money.

But IBD and their wingnut buddies keep digging that hole and keep screaming into the abyss that those damn Democrats forced the good Christian Republican God-Fearing white banks of America to loan to the damn negroes who wrecked our country by being too poor to pay the banks trying to fleece them.

There's a lot of blame to go around, but this is like blaming purse-snatchers and bad cooks who start grease fires in New York City for being numerous enough to require all those cops and firefighters to be around when they got the call on September 11, 2001, and then saying the bad cooks and purse-snatchers are the ones who really killed these brave heroes.

Does anyone actually believe the CRA caused $20 trillion in damage to the economy, and not greed, deregulation, and easy credit bubbles?

Thursday, July 14, 2011

Staking The Vampire Lie On The Housing Crisis

Over at Barry Ritholz's place, Center for American Progress economist David Min sharpens up a couple sequoia trees' worth of evidence and drives them into the heart of the vampire lie that federal regulators forcing banks to make subprime loans to poor minorities caused the financial meltdown.  Min takes the lie to school, along with one of its main authors, American Enterprise Institute flack Peter Wallison.

So how did Wallison get to the conclusion that it was federal affordable housing policies that caused the crisis, despite the countervailing evidence? As Phil Angelides, chairman of the FCIC, has stated, “The source for this newfound wisdom [is] shopworn data, produced by a consultant to the corporate-funded American Enterprise Institute, which was analyzed and debunked by the FCIC Report.”

Angelides is of course referring to Wallison’s AEI colleague Edward Pinto. Wallison’s conclusion that federal affordable housing policies are primarily responsible for the financial crisis is based entirely on the research conclusions of Pinto, who finds that there are 27 million “subprime” or “high-risk” loans outstanding, with approximately 19.25 million of these attributable to the federal government’s affordable housing policies. As I point out in “Faulty Conclusions,” Pinto only gets to these numbers (which are radically divergent from all other estimates—for example, the nonpartisan Government Accountability Office estimates that there are only 4.59 million high-risk loans outstanding) by making a series of very problematic and unjustified assumptions.

Case in point: To support his claim that the Community Reinvestment Act, which requires regulated banks and thrifts to provide credit nondiscriminatorily to low- and moderate-income borrowers, caused the origination of 2.24 million outstanding “high-risk” mortgages, Pinto includes many loans originated by lenders who were not even subject to CRA. In fact, most of the “high-risk” loans Pinto attributes to CRA were not eligible for CRA credit.

Similarly, in arguing that Fannie and Freddie’s affordable housing goals caused the origination of 12 million “subprime” and equivalently “high-risk” loans, Pinto includes millions of loans that would not typically qualify for those goals. In fact, the vast majority (65 percent) of the “high-risk” loans Pinto attributes to the affordable housing goals of Fannie and Freddie fall into this category.

The Community Reinvestment Act has time and time again been dragged out as the "real cause" of the housing depression because banks were supposedly forced into giving mortgage loans to minorities who couldn't afford the payments.  I talked about this in detail here, the pernicious revisionist idiocy that it wasn't Wall Street greed but awful poor black people who decimated the housing market has been a lie the right has been telling since Obama was elected.

David Min brings the hard numbers in his paper to disprove this stupidity, and while it gets into the weeds on the issue, it's worth reading if only for the blatant disregard of the facts involving banks, the subprime loans they made to minorities at much higher rates, and that fact that a massive majority of the mortgage boiler room shops that made these loans were not subject to the CRA at all.

Yes, it's an ugly, horrible, self-serving racist lie.  But the right doesn't care.  Only "winning" matters.

Wednesday, February 13, 2013

The Kroog Versus The "Savior"

Paul Krugman was merciless with last night's GOP response to the President speech, given by Sen. Marco Rubio.  He punctures my favorite zombie lie:  the dreaded "Community Reinvestment Act forced banks to make loans to broke minorities" load of garbage:

Here’s the passage:
This idea – that our problems were caused by a government that was too small – it’s just not true. In fact, a major cause of our recent downturn was a housing crisis created by reckless government policies.
OK, leave on one side the caricature of Obama, with the usual mirror-image fallacy (we want smaller government, therefore liberals just want bigger government, never mind what it does); there we go with the “Barney Frank did it” story. Deregulation, the explosive growth of virtually unregulated shadow banking, lax lending standards by loan originators who sold their loans off as soon as they were made, had nothing to do with it — it was all the Community Reinvestment Act, Fannie, and Freddie.

Look, this is one of the most thoroughly researched topics out there, and every piece of the government-did-it thesis has been refuted; see Mike Konczal for a summary. No, the CRA wasn’t responsible for the epidemic of bad lending; no, Fannie and Freddie didn’t cause the housing bubble; no, the “high-risk” loans of the GSEs weren’t remotely as risky as subprime.

This really isn’t about the GSEs, it’s about the BSEs — the Blame Someone Else crowd. Faced with overwhelming, catastrophic evidence that their faith in unregulated financial markets was wrong, they have responded by rewriting history to defend their prejudices.

For Republicans to admit that the banks caused the financial crisis would of course destroy the GOP's base:  the banks, and the people who profit massively by them.  They will tell this lie until they are on their deathbeds, and even then it's only 20-80 that they'd recant.

"The government caused the financial crisis" has to be made to be the truth, or the GOP is done forever.  They know that.  It's the only reason we haven't mobbed every banker in the country yet.

And they're damn well aware of it.


Wednesday, August 15, 2018

Last Call For Uncle Ben's House Of Pain

Meanwhile, the Trump regime continues to reverse every Obama-era policy it can find, and in the end few people in the cabinet will have done more damage to black people in America than HUD Secretary Ben Carson.

In a press release on Monday, the Department of Housing and Urban Development made its firmest commitment yet to tear down the Obama-era framework for enforcing the Fair Housing Act.

In a public notice dated Thursday, Aug. 9, HUD outlined its reasons for quashing the 2015 “affirmatively furthering fair housing” rule (AFFH), which had been the strongest effort in decades to crack down on segregation and discriminatory practices in and by American cities and suburbs. HUD Secretary Ben Carson cited the Obama administration’s “unworkable requirements” in a statement, saying the rule “actually impeded the development and rehabilitation of affordable housing.” Under AFFH, Carson said, cities and other HUD grantees had “inadequate autonomy” according to his understanding of federalism.

Neither criticism, fair housing experts say, is accurate. The AFFH rule told cities to set fair housing goals, but not how to meet them. It was flexible on doctrinaire questions like: Should assistance go to people or places?

Neither did the rule seem likely to dampen the supply of affordable housing. “It’s important and worthwhile and corresponded to the importance of what it’s designed to do,” says Andrea Ponsor, the COO of Stewards of Affordable Housing for the Future, which advocates for the preservation and production of affordable rental housing. “We were very supportive of the rule and we don’t feel like it had its opportunity to work yet.”

It's the usual conservative bromide: protections against discrimination are always bad for business.

In an interview with the Wall Street Journal published on Monday, Carson framed the change as a way to bolster housing production across the board. “I want to encourage the development of mixed-income multifamily dwellings all over the place,” he told the paper. While it’s true that the affordability crisis is in part rooted in housing starts per capita hitting a 60-year low, the Fair Housing Act is intended to attack segregation, not scarcity.

That comment does not mesh with Carson’s established philosophy. In his only published commentary on housing policy before his appointment to HUD, he called the 2015 AFFH rule “social engineering” that would “fundamentally change the nature of some communities from primarily single-family to largely apartment-based areas.” Fair housing advocates would have found that a dreamy, if outlandish scenario. Recipients of Community Development Block Grants have been required for decades to “affirmatively further fair housing,” but have rarely if ever been punished by HUD for not doing so.

A quick glance at the notice reveals that while the secretary contradicts himself, the outlines of a policy—to the extent they can be read that way—hew closely to conservative orthodoxy on housing, which is to reject federal efforts to demolish the walls that wealthy white suburbs have built. HUD’s new approach does not appear likely to increase production or decrease segregation. Instead, it poses a series of questions that appear almost painfully rudimentary on the heels of the Obama administration’s six-year effort to draft the AFFH rule (and 50 years of rampant local disregard for the FHA), such as:

• “Instead of a data-centric approach, should jurisdictions be permitted to rely upon their own experiences?”

• “How much deference should jurisdictions be provided in establishing objectives to address obstacles to identified fair housing goals, and associated metrics and milestones for measuring progress?”

One of HUD’s new goals is to “provide for greater local control,” a phrase understood to conjure the strict, racially-motivated land use laws that were developed by American suburbs to keep out minority populations.

So protecting affordable housing from discrimination is destroying affordable housing, the same way protecting lenders from discrimination by banks and mortgage shops "caused the 2008 Great Depression".  The "Community Reinvestment Act wrecked the economy because banks were forced to give loans to poor black and Latino people who couldn't afford them" is the worst zombie lie of the last decade.

Now Carson is resurrecting it to do the same thing to housing.  It's sickening.  But this is who the Trump regime is.

Thursday, June 9, 2011

Last Call

Republican operative Walter Russell Mead unveils the GOP's "new" strategy for winning in 2012 based on the economy.

Democrats, watch out.

The Republican Party and especially its Tea Party wing have just acquired a new weapon of mass destruction — and it has nothing to do with any of Congressman Wiener’s rogue body parts.  If they deploy this weapon effectively in the next election cycle — a big if — then they have the biggest opportunity to move the country rightward since Ronald Reagan took the oath of office back in 1981.

The Tea Party WMD stockpile is currently stored in book form:  Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon. By Gretchen Morgenson, one of America’s best business journalists who is currently at The New York Times, and noted financial analyst Joshua Rosner, Reckless Endangerment gives the best available account of how the growing chaos in the mortgage and personal finance markets and the rampant bundling of dubious loans into exotically toxic securities plunged the world, and millions of American families, into the gravest financial crisis since World War Two. It is gripping reading as well, and its explanations are clear enough that readers without any background in finance will have no trouble following the plot.  The villains?  An unholy alliance between Wall Street, the Democratic establishment, community organizing groups like ACORN and La Raza, and politicians like Barney Frank, Nancy Pelosi and Henry Cisneros.  (Frank got a cushy job for a lover, Pelosi got a job and layoff protection for a son, Cisneros apparently got a license to mint money bilking Mexican-Americans of their life savings in cheesy housing developments.)

Yep, all they have to do is convince voters that it wasn't Wall Street's fault at all, but Democrats and those damn minorities who ruined the economy.  Goldman Sachs?  Innocent as newly fallen snow.  BooMan has fun with this.

Before we can get to any Democratic complicity in this, we first have to assign blame to the people who actually had the power to do something. Of course, Gretchen Morgenson served as Steve Forbes's press secretary and is known for writing hyped and slanted opinion pieces posing as analysis. She also likes to steal bloggers' work without giving attribution. We know how her bread is buttered. As for Rosner, he was prescient about the housing crisis, but he didn't blame Barney Frank and ACORN for the impending doom. He blamed the rating agencies and the SEC for failing to do due diligence on the collateralized mortgage bonds. If he now has found new villains, it just means he has a book to sell. But, in truth, I don't think Mr. Mead is giving a fair and balanced portrait of the book, which has won the praise of people like Bill Moyers. It sounds to me like it has a lot of villains that were conveniently left out of this review.

But, yeah, if the Republicans could convince people that they're underwater on their mortgage and out of work because the Democrats gave free houses to blacks and Latinos, the Democratic Party would be toast

I've documented many, many times before that the whole "Community Reinvestment Act forced banks to give subprime loans to minorities who couldn't pay" theory was total and complete baloney.  Loans given under the CRA were to minorities that were in better average financial shape than the average subprime borrower.  If anything, minorities who had better credit than the average subprime borrower were forced by greedy banks into subprime loans, even though they should have qualified for better mortgage rates.  In fact, the vast majority of mortgage lenders that went under in the subprime housing disaster were not banks large enough to be covered by the CRA at all, so they made zero CRA loans and still collapsed.  In fact, banks went out of their way to foreclose on minorities who had good credit and fell victim to bad loans pushed by the banks.

So it's not like this is a "new" strategy at all, it's blame blacks and Latinos for the entire housing depression, and in turn the entire economic depression.  Because yes, minorities wrecked the economy on purpose because they wanted an unemployment rate of 17% plus.

All the GOP has to do to win is convince voters that minorities caused the economic collapse and not Bernie Madoff and Jaime Dimon and Hank Paulson.  Go for it, guys.  If that's your big plan for 2012, let 'er rip.

Monday, June 29, 2009

100,000 Reasons The CRA Didn't Cause The Housing Crisis

Yesterday I mentioned the vampire-like lie that the "Community Reinvestment Act caused the housing collapse" would not die, as John Carney brought it up again. I gave Barry Ritholtz the kill yesterday, and today he's put up $100,000 of his own money to debate any and all comers on this.
Well, its time to put up or shut up: I hereby challenge any of those who believe the CRA is at prime fault in the housing boom and collapse, and economic morass we are in to a debate. The question for debate: “Is the CRA significantly to blame for the credit crisis?”

A mutually agreed upon time and place, outcome determined by a fair jury, for any dollar amount between $10,000 up to $100,000 dollars (i.e., for more than just bragging rights).

The nonsense rhetoric blogged about has no cost to those pushing these discredited memes — but interferes in the societal attempts to understand how these problems arose and then how to fix them. Perhaps this will help clarify the issue by forcing those with partisan agendas to stand behind their claims.

Which of the many “CRA was a major factor” proponents have the courage of their conviction to step forward?

My money's on Barry. Big time. John Carney, Megan McArdle, Jim Pethokoukis, let's see your hands...

...Felix Salmon at Reuters reports that Carney wants to take up Ritholtz on his offer. Let the games begin.

Monday, May 18, 2009

Race And Subprime Lending

Baseline Scenario puts together a sobering post on the issue of race and subprime lending in America and arrives at the conclusion that racism still exists.
Like most forms of hardship in our society, the foreclosure crisis is disproportionately affecting minorities. The New York Times conducted a study of foreclosures in the New York area and found, among other things:

Defaults occur three times as often in mostly minority census tracts as in mostly white ones. Eighty-five percent of the worst-hit neighborhoods — where the default rate is at least double the regional average — have a majority of black and Latino homeowners.

Well, that might simply be a function of poverty: statistically speaking, minorities are more likely to be poor, and therefore more likely to become delinquent on their mortgages. But I don’t think it’s that simple.

It never is. Turns out that a lot of minority homeowners who could have qualified and gotten regular mortgages were given subprime loans anyway.

You can also give him a higher-rate mortgage than he could otherwise qualify for. According to the Times article:

Roughly 33 percent of the subprime mortgages given out in New York City in 2007, [Secretary of HUD Shaun] Donovan said, went to borrowers with credit scores that should have qualified them for conventional prevailing-rate loans.

In general, high-rate mortgages account for a larger proportion of mortgages in minority communities, even after taking median income into account. According to sociologist Gregory Squires,

We see these loans heavily concentrated in poor neighborhoods and targeted to minority neighborhoods. There is some evidence that these neighborhoods were actually targeted — that lenders have gone after people whom they think are less sophisticated borrowers, including single women and the elderly. . . .

Credit rating and income would and does explain some of the patterns. But when you control for those, segregation is also a factor. . . . In those metro areas where segregation is highest, the share of loans that are subprime goes up.

If you are disproportionately steering minority borrowers into higher-rate mortgages, then of course they will suffer a higher rate of defaults and foreclosures than you would predict solely from their other characteristics (income, credit rating, etc.).

Remember, the argument from the "broke-ass minorities caused the subprime crisis" theory states that banks were forced to give minorities loans under Clinton's (It's always Bill Clinton's fault) Community Reinvestment Act, and the only loans these minorities could get were subprime loans at higher rates (which they couldn't pay). Banks were therefore forced to give risky loans to risky customers, and that's how these defaults wrecked the financial industry and eventually the entire economy.

But this of course shows that this theory is completely false. The banks were greedy and gave minorities in poorer neighborhoods subprime loans to rip them off. They should habve qualified for better prime loans. They were instead given worse loans and higher rates based on race and location, NOT income.

But here's the real mindblower from the Times article.

In retrospect, this seems like an area where better consumer education could have played a role. Back to the Times:

Upper-income black borrowers in the region are more likely to hold subprime mortgages than even blacks with lower incomes, who often benefit from homeownership classes and lending assistance offered by government and nonprofits.

Maybe the economic debacle we are all living through will lead to better personal finance education, both in school and for adults. That’s one silver lining to hope for, since an end to racism is almost certainly far off.

In other words, they didn't know they were getting ripped off. They didn't shop around...they just figured "Well, that's the rate you get when your me."

Buyer beware, of course. But the banks certainly got greedy across the board. They ripped off millions of Americans, bilking them for billilions. Now the bill is due, and we're all paying for corporate greed.

Remember this story next time somebody tells you it was the "broke-ass blacks and Mexicans" who ruined the economy.

Saturday, October 31, 2015

Taking The New York Red Line

Anytime I hear claims that institutional, systemic, and economic racism is long gone from blue states and is "only in the South" I have a good long laugh because I know that's absolutely untrue.

The green welcome sign hangs in the front door of the downtown branch of Hudson City Savings Bank, New Jersey’s largest savings bank. But for years, federal regulators said, its executives did what they could to keep certain customers out. 
They steered clear of black and Hispanic neighborhoods as they opened branches across New York and Connecticut, federal officials said. They focused on marketing mortgages in predominantly white sections of suburban New Jersey and Long Island, not here or in Bridgeport, Conn. 
The results were stark. In 2014, Hudson approved 1,886 mortgages in the market that includes New Jersey and sections of New York and Connecticut, federal mortgage data show. Only 25 of those loans went to black borrowers
Hudson, while denying wrongdoing, agreed last month to pay nearly $33 million to settle a lawsuit filed by the Consumer Financial Protection Bureau and the Justice Department. Federal officials said it was the largest settlement in the history of both departments for redlining, the practice in which banks choke off lending to minority communities.

Those of you keeping score at home, 25 out of 1,886 is 1,3%.

Folks, post-Great Recession redlining is rampant all across the country, and one of the main issues I have with the awful lie that anti-redlining measures like the Community Reinvestment Act signed by Clinton into law forced banks to give mortgages to "broke minorities" and caused the housing collapse.  That particular lie I've documented for seven years on this blog as false.

And redlining is exactly why the CRA lie cannot possibly be true: if banks weren't lending to minorities, then how did minorities cause the Great Recession Housing Crash?

Ahh, but that brings us back to redlining going on still today.  And if you want to know why the GOP is so eager to get rid of the Consumer Financial Protection Bureau, this is one major reason why.

Saturday, October 22, 2011

Home, Home I'm Deranged, Part 27

The Obama administration will reveal this week their newest effort to try to fix the housing depression, focusing on homeowners underwater on their mortgages.

Homeowners who owe more than their houses are worth will get new help to refinance in a government plan to be unveiled as early as Monday to support the battered housing sector, sources familiar with the effort said.

The Obama administration has been working with the regulator for Fannie Mae and Freddie Mac to find ways to make it easier for borrowers to switch to cheaper loans even if they have little to no equity in their homes.

The regulator, the Federal Housing Finance Agency, intends to loosen the terms of the two-year-old Home Affordable Refinance Program, which helps borrowers who have been making mortgage payments on time but who have not been able to refinance as their home values have dropped.

Officials have been frustrated that attempts to bolster housing -- the epicenter of the deepest U.S. recession since the Great Depression -- have borne little fruit. Some top Federal Reserve officials want the central bank to consider buying more mortgage-backed securities as a way to help.


And while it's a good idea, allowing underwater homeowners access to better mortgage terms isn't going to fix the problem.  The real issue has been and remains the massive number of foreclosures clogging the market and driving housing prices down.  Somebody needs to buy those mortgages, but the banks are broke and so is the American consumer.  The government should step in with another Depression-era style program to buy up these homes, but of course Republicans continue to block any efforts to fix the economy unless the effort only improves the top one percent's balance sheet.

Oh, and let's not forget the greedy banks that put those millions of new foreclosures on the market with robosigning shenanigans too.  The right continues to want to blame House Democrats and "government loans given to minorities that couldn't repay" but the simple fact of the matter is government subprime loans had much stricter standards than the ones issued by banks.  Private lenders who were not subject to these lending standards made the bad loans, not Fannie Mae, not Freddie Mac, and not the lenders who made Community Reinvestment Act loans.

Republicans are trying to do everything they can to pin the financial crisis on Fannie and Freddie and not Wall Street, but gosh, nobody's buying that garbage.  Just look outside.

Sunday, June 28, 2009

Last Call

How many times must people drive a stake through the bullshit that is "Broke-ass black people caused the housing collapse" anyway? The Community Reinvestment Act (CRA) did not cause the housing depression. Greed did.

Barry Ritholz kills this garbage once again:
Assume arguendo that CRA legislation forced banks into making high risk, ill advised loans. And, let’s further assume a huge percentage of these government mandated mortgages have gone bad. The buyers who could not legitimately afford these homes or otherwise qualify for other mortgages have defaulted, and these houses are either in default, foreclosure or REOs.

What would this alternative nation look like?

Given the giant US housing boom and bust, this thought experiment would have several obvious and inevitable outcomes from CRA forced lending:

1) Home sales in CRA communities would have led the national home market higher, with sales gains (as a percentage) increasing even more than the national median;

2) Prices of CRA funded properties should have risen even more than the rest of the nation as sales ramped up.

3) After the market peaked and reversed, Distressed Sales in CRA regions should lead the national market downwards. Foreclosures and REOS should be much higher in CRA neighborhoods than the national median.

4) We should have reams of evidence detailing how CRA mandated loans have defaulted in vastly disproportionate numbers versus the national default rates;

5) CRA Banks that were funding these mortgages should be failing in ever greater numbers, far more than the average bank;

6) Portfolios of large national TARP banks should be strewn with toxic CRA defaults; securitizers that purchased these mortgages should have compiled list of defaulted CRA properties;

7) Bank execs likely would have been complaining to the Bush White House from 2002-08 about these CRA mandates; The many finance executives who testified to Congress, would also have spelled out that CRA was a direct cause, with compelling evidence backing their claims.

So much for THAT thought experiment: None of these outcomes have occurred.

Zero.

In reality, the precise opposite of what a CRA-induced collapse should have looked like is what occurred. The 345 mortgage brokers that imploded were non-banks, not covered by the CRA legislation. The vast majority of CRA covered banks are actually healthy.

As the Master Control Program famously said, "End of line." Good old fashioned greed killed the housing market. The CRA is nothing more than a convenient dupe, when it turns out it might have actually been the only positive thing going on in the entire housing market during the Bush years.

Saturday, June 19, 2010

Predator-Prey Cycle

An exhaustive study of the 2007-2009 foreclosure crisis (still ongoing, frankly) showed that even despite income levels,  African-Americans and Latinos were more likely to be foreclosed upon.
Recent African American and Latino home borrowers — regardless of their income — were much more likely to lose their homes to foreclosure than non-Hispanic whites during the ongoing housing crisis, according to a new study.


In fact, as their incomes climbed, minority borrowers saw their likelihood of foreclosure grow even larger in comparison to non-Hispanic white borrowers in the same income bracket.

That's the conclusion of "Foreclosures by Race and Ethnicity: The Demographics of a Crisis," a new report by the Center for Responsible Lending, which analyzed racial and ethnic data on more than 80 percent of the estimated 2.5 million home foreclosures completed between 2007 and 2009.

The study found non-Hispanic whites accounted for 56 percent of home foreclosures during this two-year period compared to just 16 percent for Hispanics and about 12 percent for African American homeowners.

But nearly 8 percent of blacks and Latinos who got home loans or refinanced between 2005 and 2008 ultimately lost their homes to foreclosure between 2007 and 2009, compared with just 4.5 percent of non-Hispanic whites.

That means that, overall, black and Hispanic homeowners were 76 percent and 71 percent more likely to go into foreclosure than non-Hispanic whites. And blacks and Latinos with the highest incomes were 81 percent and 94 percent more likely to face foreclosure than non-Hispanic whites with similar incomes, the study estimates.

"These disparities hold across all income lines," said Keith Ernst, the center's director of research, who co-authored the report.
That's vital information there and should put the nonsense about the Community Reinvestment Act causing the foreclosure crisis to bed for good.  Sadly, there are those who aren't paying attention to the bolded statements there once again saying this proves that Those Damn People wrecked the economy, but real wingers don't let facts get in the way.

The reality is that the mortgage industry was more than happy to victimize minorities to get money because housing prices were going up, and they only way to get more money was to get more homeowners borrowing.  That meant going to minority borrowers, a lot of them first-time homeowners, and giving them the slimiest deal possible because they could get away with it.

All that greed backfired eventually.  But it's nice to blame minorities when even the ones with high income were getting foreclosed on more than whites.

Sunday, March 28, 2021

Last Call For Cuomo's Mary Jane Moment

Maybe I'm just a cynical bastard, but it seems to me that embattled NY Dem Go.v Andrew Cuomo, now facing more than a half-dozen sexual assault allegations from current and former staffers, is trying to buy his way out of impeachment through a major new marijuana legalization deal, something he's resisted for years now.

Governor Andrew Cuomo and state lawmakers formally announced a final deal on legislation to legalize marijuana in New York State late Saturday night.

The bill—called the Marijuana Regulation & Taxation Act—would permit adults 21 and over to purchase marijuana, grow the plant in their home, and divert funds to education and drug treatment.

It would also create a cannabis management office and a regulatory framework that would cover adult-use, medical marijuana, and cannabinoid hemp, the latter which includes CBD products. (Existing medical and cannabinoid hemp products programs would be expanded under the legislation.) A social and economic equity aspect of the bill aims to help people harmed by marijuana prohibition enforcement get into the upcoming business.


"For generations, too many New Yorkers have been unfairly penalized for the use and sale of adult-use cannabis, arbitrarily arrested and jailed with harsh mandatory minimum sentences," Cuomo said in a statement. "After years of tireless advocacy and extraordinarily hard work, that time is coming to an end in New York State."

The governor's office says the adult-use program is expected to bring in $350 million in taxes each year as well as create 30,000 to 60,000 jobs statewide. Retail sales of marijuana would include a state sales tax of 9%. Localities' sales tax would be 4%, with counties getting one-quarter of tax revenue and three-quarters would go to the municipality.

Under the bill, 40% of the revenues would go towards education, 40% to community reinvestment grants to communities harmed by criminalization of drugs, and 20% to drug treatment and public education programs.

Lawmakers are expected to pass the bill this coming week, after hammering out an agreement with Cuomo late last week.

One of the legislation's sponsors, Manhattan State Senator Liz Krueger, said in a statement, "My goal in carrying this legislation has always been to end the racially disparate enforcement of marijuana prohibition that has taken such a toll on communities of color across our state, and to use the economic windfall of legalization to help heal and repair those same communities."


She added, "I believe we have achieved that in this bill, as well as addressing the concerns and input of stakeholders across the board. When this bill becomes law, New York will be poised to implement a nation-leading model for what marijuana legalization can look like.
"

 

I'm not questioning the legislation, in too many states with marijuana legislation, it continues to punish Black and brown folk and freezes them out of yet another business opportunity in favor of white-owned business investors who only see dollar signs. The criminal justice reform elements are definitely here in New York's proposed legislation. Colorado, Ohio, and even California need to take notice.

What I'm questioning is the timing.

If this is part of an unspoken deal to look the other way on the voluminous allegations against Cuomo, it's eventually going to come to light, and it's going to be the end of Democrats in New York. If Republicans in the state were even remotely sentient, they'd make that accusation straight away.

That needs to be investigated by Tish James in the AG's office. This is some dank weed, indeed.

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