Did Sotomayor cause the sub-prime meltdown?

posted at 1:55 pm on June 22, 2009 by Ed Morrissey
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I’m no great fan of Sonia Sotomayor, but John Carney over at Business Insider stretches to make a case against the Supreme Court nominee on the basis of the sub-prime meltdown.  Sotomayor sat on the board of New York’s state agency on mortgages from 1987 to 1992, and used her position to push for greater lending to low-income families:

Sonia Sotomayor, Barack Obama’s nominee for a seat on the Supreme Court, served on the board of a New York State agency charged with providing discounted mortgages to middle and low income homebuyers from 1987 to 1992. During the time, she was a consistent advocate of pushing the agency to provide more mortgages to low-income home buyers. In short, she advocated the kind of aggressive lending practices that helped create the mortgage meltdown.

Sotomayor’s tenure on the State of New York Mortgage Agency preceeded the current mortgage crisis by close to two decades, so she can’t be held directly responsible for our current problems. But in many ways, her approach to home ownership mirrored–or perhaps foreshadowed–the policies that led to the housing boom and bust.

The agency, which is called SONYMA, is a local version of Fannie Mae and Freddie Mac. It initially provided mortgage insurance to first time homebuyers, mostly on middle-income housing. It expanded into lower-income homebuyers and then into directly buying mortgages in an attempt to push down mortgage rates. During her time on the agency’s board, Sotomayor was a consistent critic of its activities, according to this story in the New York Times. And her critique was always the same: not enough loans were being insured on homes for lower-income and minority buyers.

The New York Times gives this inappropriately positive spin for Sotomayor, though:

Time and again, Sonia Sotomayor challenged her fellow board members at the State of New York Mortgage Agency, asking pointed questions about its work: What of the poor? As we help build new neighborhoods upon the rubble of the old, are we abandoning those with the lowest incomes? …

“Ms. Sotomayor voiced her continuing objection to the rehabilitation of projects in low-income areas without providing for a higher component of low-income families,” according to agency minutes from March 1990. “She repeated her request for an analysis of the various economic groups in the neighborhood affected by the project.”

She ended up voting for most of those projects. But in voicing her concerns, Ms. Sotomayor offered a window into her tough and skeptical style, and into her consistent focus on the poorest of the poor, hundreds of pages of agency records show.

Eh.  This has little to do with how she would act as a justice, or in fact little to do with how she’s acted as an appellate jurist.  Neither Carney nor the Times draws any lines between Sotomayor’s actions on SONYMA’s board and rulings from the bench.  In the absence of such connections, it shows that Sotomayor used her position to argue for looser lending terms, but didn’t abuse her power in that regard.

As it is, though, the main problem with subprime lending started years later, in 1998, when the government mandated that Fannie Mae and Freddie Mac create artificial demand for subprime lending through the issuance of securities on bad loans.  SONYMA didn’t do that, and neither did Sotomayor.  That blame falls squarely on Congress and the Clinton administration.

Had President Obama appointed her to run HUD, this would be relevant. Since Obama appointed her to the Supreme Court, we should focus on what she did after SONYMA, when Sotomayor took her seat on the federal appellate bench.  (via King Banaian)

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