For those who want a smoking gun to show the genesis of the financial collapse, this short sequence from a longer video I posted this week will do it. Clinton HUD Secretary Andrew Cuomo announced a settlement of a lending discrimination complaint with Accubanc, a Texas lender whose prerequisites for mortgages came under attack from “community organizers” at the Fort Worth Human Relations Commission and the city of Dallas. I clipped out this sequence to underscore its importance:
CUOMO: To take a greater risk on these mortgages, yes. To give families mortgages that they would not have given otherwise, yes.
Q: [unintellible] … that they would not have given the loans at all?
CUOMO: They would not have qualified but for this affirmative action on the part of the bank, yes.
Q: Are minorities represented in that low and moderate income group?
CUOMO: It is by income, and is it also by minorities? Yes.
CUOMO: With the 2.1 billion, lending that amount in mortgages — which will be a higher risk, and I’m sure there will be a higher default rate on those mortgages than on the rest of the portfolio …
Here, in fact, is the genesis of the problem, the ideology that created the monster. Cuomo, the Clinton administration, and Congress believed they had the right and the power to determine acceptable risk for the lenders, rather than lenders determining it for themselves in a free market. Even while imposing risk standards on lenders, Cuomo admits that he expects a higher default rate on the new loans — which is why the lenders didn’t want to write them in the first place.
In other words, the CRA didn’t get used to fight discrimination, but to force lenders to give money to high-risk borrowers for political purposes. And Cuomo knew it.
That was the political arrogance at the heart of the collapse. However, the CRA was more a sideshow than the actual problem. When Congress decided that enforcement alone wouldn’t generate enough mortgages to boost their political fortunes, they had Fannie Mae and Freddie Mac eliminate the risk entirely for lenders through the purchase of the subprime loans. Without that risk and with almost-guaranteed short-term profits of subprime loans, lenders went wild while Fannie and Freddie repackaged them as quasi-government bonds for investors.
While Democrats like Barack Obama, Harry Reid, and Nancy Pelosi keep blaming “greed” for the collapse, it was Democrats like Barney Frank and Chris Dodd building that “greed” into the system in order to drive the subprime lending market. And it was Democrats like Frank, Dodd, Maxine Waters, and Lacy Clay who suggested that regulators like Armando Falcon were racists for blowing the whistle on the Ponzi scheme they created.
The Democrats decided, as Michelle says, that mortgages were a civil right, and wouldn’t cost the American taxpayers a dime. How well is that working out, America? And now, the question you have to ask yourselves is this: Do you want the nation’s economic policies run by Obama, Pelosi, Reid, Dodd, and Frank for the next two years?