Dave put together this blog post after seeing news stories on the subject below.
Jenn,
There is a new conservative meme out there trying to explain the financial meltdown on, get this... black folks.
Yes, you read that correctly. The poorest segment of the American population has apparently outwitted America's great financial institutions, and took them for all their worth.
This is the new talking point initiated by Neil Cavuto at Faux News. A few days ago, he suggested that giving home mortgages to minorities was the underlying problem. Since the same argument was parroted by both Laura Ingram and John Stossel this evening, discussed at length by the ultra-conservative Investor's Business Daily, and traceable to a Cato Institute rag from January 2008, I thought I ought to look into the matter a bit.
The argument suggests that the Community Reinvestment Act (first passed in 1977, and strengthened in 1995) is responsible for much of the crisis because it supposed "empowered banking regulators to punish banks which do not lend to the poor and minorities at the level that Obama's fellow community organizers would like." Banks were thus given "numerical quotas," which made our powerful financial corporations quake in their boots. Oh no, Big Gummit is comin' to town. And so, the argument goes, "loans started being made on the basis of race, and often little else"
(Pause for laughter and ridicule.)
What was the result? According to conservatives, them minorities just jumped into the market and diluted all our good mortgages with their own bad juju. Since those ingrates refuse to pay back their loans, good white folk are left high and dry.
Here are a few useful and brief responses:
1) "Ha ha ha ha ha ha ha ha haaaaaaaa! What a joke. Oh my god, you CAN'T be serious!"
2) "Black folks owned 9% of the homes in 1994. Eleven years later, they owned the exact same percentage. So there really wasn't any huge racial disparity. And if there wasn't a huge racial disparity, you can't really blame blacks can you? Sorry, no."
3) "Of the subprime loans, only 20% were connected with the Community Revitalization Agency. In other words, 80% of these 'bad' loans had little to no connection to the agency you said caused this thing. Now don't you feel silly?"
4) "If risky loans were a problem, why did Bush change FHA rules in 2005 to allow the government to provide federally-backed, zero-money-down loans for the first time ever? Man, that would have been exceedingly dumb."
5) "The loans themselves aren't the problem; the problem is what happened after the loans were made. Thanks to new rules, loans were swapped and resold dozens of times over, and that's how $1 trillion in subprime loans become a $40 trillion house of cards."
6) "The financial industry earned $3.5 trillion in profits from 1995 to 2007, yet now cry about $2 billion in potentially-bad loans. Since all those profits went in their pockets, shouldn't the bailout come from the same place?"
Oh, those crazy Republicans. They sure know how to divert attention, play on racial stereotypes, and stick their snouts into the public trough, don't they? They'll tell you that the market is king and government should stay out of it, but when those salad days end, they're first in line for a handout. Instead of "trickle down" economics, we just get to "trickle up" our tax dollars.And then magically, the government should just stay out of the market again.
I say no! No to the Wall Street bailout, and yes to helping borrowers and ordinary folks as needed. We really don't need to pay the fat cats first, or listen to claptrap about deregulation. Greed can be both helpful and doleful, which is why regulations are essential for a well-ordered market that serves society.
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