According to the GOP, this Community Reinvestment Act was ressurected by Bill Clinton and forced banks to lend to minorities, who are "riskier."

Worse than that, they might move into one's own neighborhood.

The Republicans secretly want Obama to win just so they'll have someone new to blame everything on. Blaming it all on Bill is getting so old.

Yeah, I saw that nonsense on another board. And then they said it was Fannie and Freddie making those loans to the people who couldn't make their payments due to the CRA.

I informed them that they were sadly misinformed if they thought Fannie and Freddie made loans. Then I informed them the CRA has been around since the 1970s.

Then I informed them that the liar loans which are at the heart of the liquidity crisis we're seeing now were made by private companies in order to goose their returns, and they often were made to middle class borrowers.

They do have a point, though, when they say things like why is it the government's job to have entities like Fannie and Freddie trying to increase homeownership?

If you can't afford a house, then you shouldn't be allowed to buy one. Nobody benefits when someone buys a house they can't afford other than the realtor and the mortgage salesman. Everyone else loses. The person who loses the house gets their credit destroyed. The bank loses out because now they have a property they need to get rid of. The neighbors lose out because their house values go down.

Everyone loses.

One thing I would do if I were financial king is only allow loans that conformed to the standards of Fannie and Freddie. I'd also put in place strict maximum percentage of income limits on loans, and all loans would pay off not just the interest, but at least one percent of the principal of the loan each month.

Boom. Liar loans gone. Loans where you actually increase the amount of money you owe gone.

And don't forget, President Bush was always touting his promotion of increasing home ownership.

There are numbers somewhere, because the loan apps require you to answer the HMDA section, so SHOW ME THE NUMBERS.

The FNMA loan default rate at its HIGHEST couldn't have caused this.

The pisser is that nobody in journalism land seems to know how to pick up the phone and talk to people in the business who actually qualify people to get a sense of how it works.

I'm not sure, Kris. Fannie and Freddie were pretty levered up. If you've got a 30 to one leverage ratio, all it takes is a three percent default rate to wipe out just about all your equity.

I don't think anyone jumped out of the buildings from shame. They realized they were financially wiped out. People weren't much different then.

I am thoroughly nauseated by the blatant racism spewed by the Republican party. Just like that letter I published the other day from "Sam," just like my father-in-law that I love otherwise, this culture of protecting white power is not only insulting to the minority races but to those of us who do not believe in racism because we get lumped in with the bigots. I just hate it.

I hope that with generations changing that those old stereotypes will as well but I am not convinced. Grandparents teach parents who teach their own children and the sins repeat. Just this morning I got an email from my Aunt blaming the current mess on FDR of all people for underestimating the cost to us of Social Security and the Democratic congresses tax increases. Can't someone actually research these things and broadcast the facts instead of some skewed speciousness. Ugh. I am very, very unhappy.

uggh...yes, and leave it to the repugs to take a complex situation and make it simple for people to understand and to pin the blame while feeling virtuous - blame Bill Clinton, blame socialism, blame the poor, black people

granted, it is much easier than trying to understand the concept of "leverage" and mortgage-backed securitization, which is what is creating the crisis, not the loans themselves. Thus, I think that Kris and Tony Wang are both right.

I am not a finance expert, but I have some loose consulting experience with MBS c/o GNMA, so I can kinda relate to "the idiot's guide to the mortgage mess" since I had to do a sorta quick study a few years ago.

Here's another take and excellent explanation for us dummies on the Fannie Mae leverage problem

Fannie Mae secure
from before the bailout, but it explains the concepts nicely.

Leave it to the freaking Republicans to point fingers at the very people they cheated, deceived and coerced into making their mortgage companies, bankers and real estate developers rich. Blame, Blame, Blame comes right after Drill, Drill, Drill.....Deregulate, deregulate, deregulate. It is time to get these phone b-stards out of our system, out of our government, out of our hair. Let us do nothing and see what comes as the result of their policies, their behaviour and their incompetent president and politicians. How much worse can it get? I have a feeling Main St. will recover faster than Wall St. And I hope that the Americans that suffer the most from this debacle are the ones who put the idiot in office.

You write: "Forget that sub-prime investment instruments were in very high demand by Wall Street, forget that everyone was making a killing on them and everyone thought they were the greatest thing since sliced bread.

This is the crux of the matter. Mortgage brokers were able to get loans for just about anyone that breathed -- with credit scores as low at 520 (maybe even lower.)

These were 100% financed loans for the most part -- the buyers had little to no equity position in their homes. They lived in a home they "owned" instead of having to pay rent and were able to deduct the interest payments from their tax return. Who could walk away from that sweet deal?

The drama negativity played out for them for many reasons:

1) Some people with low credit ratings really do not know how to manage their money, even to the point of realizing what would happen with late mortgage payments, thereby quickly losing their home. (Not the same as negotiating with the landlord.)

2) At least in Florida, property taxes increased with soaring market values sometimes doubling or tripling. During the same period, home owners insurance also doubled for many. If the buyer had an adjustable rate mortgage, their entire payment increased. Since most people bought as much home as they could possibly afford, these three increases pushed the budget beyond the limits of the middle class.

3) The housing crisis, gas prices, and other economic woes slowed the construction industry's growth, putting many people out of work. This then trickled down through every related industry, and then to restaurants and other small businesses. Even nail techs and hair salons find their business dwindling.

The blame should rest squarely on the shoulders of those underwriting and approving the mortgage loans with hugely relaxed credit standards.

the best part...they get to have it BOTH WAYS...

in addition to blaming minority homeowners they are also trying to
tie Obama to Franklin Raines, former head of FNMA, who by the way is also a black man...hmmmm

In case you haven't seen the recent TV ad?
McCain Ad

For the record, their source is one article in the Washington Post Style section that mentioned an off-hand conversation between Raines and an Obama advisor.

It's only a matter of time until they try and find a way to work affirmative action in there as well - if those minorities hadn't been handed jobs for which they weren't qualified, they wouldn't even have had enough money for a liar's loan! It's all the fault of godless liberals!

"No, seriously, they're THAT RACIST."

I got nuthin that says it all better than that.

Actually, I have heard none of this in any of the investment news. The concensus is that the current economic debacle we are in has been a bipartisan effort leveraged by the greed of Wall Street "banksters".

We are one of those "minorities and low-income folks." Bought house VA $1.00 down 30yr mort. 1988-2008 we now owe $9000.00.We were a little smarter Not to do Variable rate mort. Read the fine print on your papers be for sign or have a lawyer with you at signing.

Chorus from Iris DeMent's song "Wasteland of the Free":
Living in the wasteland of the free,
Where the poor have now become the enemy.
Let's blame our troubles on the weak ones,
Sounds like some kind of Hitler remedy.
Living in the wasteland of the free.
(Released in 1996)
Neo-neanderthals always loved pounding the poor.

It's interesting to see that so many people on open salon are or have been professionally involved with the mortgage market. Without figures, of course, nobody can really evaluate the validity of what you say, but the unanimity here is impressive. If what you all say about your experience is true, this cannot be the result of the obvious pro-Democratic bias of Open Salon, or not purely.

Best line of this discussion: "good taste to jump out of buildings." Hilarious, Stellaa.

I certainly wouldn't put it past some Republican whack-job to blame it on the CRA, and do not disagree for a moment that that wide preponderance of racists in this country either are or tend to vote Republican, but I have to agree with Black Bart - the consensus in the financial press and among almost all of the market-watching blogosphere is that the current crisis was caused by greed (or as Alan Greenspan once put it, 'irrational exuberance') and lack of regulation. I have seen no credible financial analyst try to lay the blame on the CRA.

I don't think they do anything by chance. I think they're banking on the idea that what will keep Barack from being elected is his skin color. And so if they can associate this crisis with people of color, it should be an easy leap for the guilt-by-association-of-skin-color crowd to conclude that electing Barack means more favoritism for people of his race. In other words, I think this is a subtle code that legitimizes voting by skin color because the people doing it now think they can point to a place where that objectively matters.

The really sad part is that the poorest among us (regardless of race) may work the hardest on paying their bills. I haven't got specific statistics to point to but my gut guess would be that even though they may miss payments now and then, they're going to try to get those loans paid. I wonder if some of the problem relates to how focused our entire loan system is on an all-or-none strategy of paying everything on time or having your credit rating ruined. I wonder if that policy exists less as a way of measuring who's a good risk or not and more as a way of giving a marginally plausible excuse to charge more money on interest just because they can.

Blackbart, and Lonnie, I have 2 links to my post with 2 separate Republicans (Cavuto and Kudlow) talking on TV, alleging this chain of events.

They are not financial experts, but most Americans aren't watching Bloomberg or CNBC, they're watching Fox or MSNBC, where these clowns can reach them better. Consensus of experts be damned -- perception is reality, the end.

Depressing - but thanks for bringing it to our attention. I can't help but see this as another case of "blaming the victim." Federal reserve bank data indicates that a majority of recent minority loans were ARMS, regardless of income, but this seems to be a case of aggressive marketing by those giving the mortgages.

MB, I know about that whole 'perception is reality' thing.

The noise machine, megaphone effect of people like Limbaugh, Beck, Kudlow, Cavuto and so many others, whose fundmantally racist, paranoid, anti-science, anti-humanitarian views are given such platform, such volume because it sells advertising - I mean my gag-reflex is still pretty functional. But despite the perception that these clowns speak for a preponderance of my fellow citizens, the reality is that they do not. So I don't get any more exercised about them or what they say than I do about the homeless guy on the corner with the sandwich board that reads THE END IS NEAR.

Very interesting. Thanks for posting this. I always think it is just me being sensitive when I see/hear another Republican blaming everyone else for why things are so bad. It is nice to see that I am not the only one who notices this.

i think we should blame it all on Reagon. keep repeating it. alternate it with blame it on W. if lies work the the right, feed it right back to them. what is even better is that in this case, it is true.