Ayn Rand Must Be Turning In Her Grave!
In a speech given today in New York, Obama blamed lobbyists, greedy businessmen and complacent politicians for the foreclosure crisis.
Oh puh-leeze! This is all the fault of the government forcing financial institutions not to “discriminate” against people who could never afford homes/mortgages in the first place. And what is it with people these days that they would sit and listen to such a b.s. speech? Here’s an explanation from someone with actual brain cells:
In the 1990s, the last time a Clinton was in the White House, special interest groups and Democratic Congressional leaders criticized the mortgage industry for redlining urban areas, thereby by-passing minority applicants who, they claimed, were unfairly being denied the opportunity for homeownership. Bowing to the enormous political pressure, and facing the first raw data from HMDA reporting that reflected “underrepresentation” of minorities in the mortgage market, underwriting standards and criteria were relaxed.
In fact, as Economics Professor Stan Liebowitz of the University of Texas Business School has pointed out recently, “no sooner had the ink dried” on the initial HMDA reports, when the Boston Fed issued new guidelines for mortgage lenders, designed to eliminate what it called “arbitrary and outdated criteria that effectively disqualif(ies) urban and lower income minority applicants.” Of course one of the problems of taking raw data and using it to create policy, is that often the raw data fails to define the whole picture. Prudent governing sometimes requires patience and clarification of important information. As it turned out through a closer analysis of HMDA results, many lower income and minority applicants were shut out of the mortgage market precisely because they were unqualified economically to shoulder the financial burden of a home mortgage payment, due to income and credit problems. Instead of designing economic policies to correct the cause (i.e. create more opportunities for higher income, credit counseling and education) the government did what it does best: it created a dramatic, quick fix. It encouraged the marketing and processing of “sub-prime” loans.
Relaxed underwriting standards meant that credit history, income, assets, savings history, and the overall ability to repay, would be removed from the equation (or its significance reduced), and products would be permitted that avoided the fundamental criteria of good lending practices. Lenders were thusly encouraged to offer products, and underwrite loans in a manner that would be “unbiased,” not as to color, ethnicity, or national origin, but irrespective of financial soundness and the ability to repay. Thus the industry found itself in the unenviable position of being pressured to grant loans to people who were told they did not have to demonstrate the ability to repay, while any demonstrative failure to make minority and urban loans, as reported under HMDA, threatened regulatory retaliation.
Now that the regulators created the mess how do they respond? By pointing fingers at the industry, demonizing the very mortgage brokers and lenders who did everything they could, under existing guidelines, to meet the expectations and directives to make homeownership available to everyone. The sub-prime loan, once the preferred solution to perceived economic disparity, is now a term of derision and outrage. How far we’ve come!
Out on the stump, the hypocrisy is evident. Hillary Clinton, whose husband was President during the relaxation of lending criteria (when it was a “good thing”), now accuses the industry of “predatory lending” and “greed” for having used relaxed lending criteria (now that it is a “bad thing”). Mrs. Clinton is not alone in her new found concern for borrowers. All the remaining candidates, including Romney. Obama, and McCain, have suggested drastic federal intervention in the mortgage market as a method to protect the victims they themselves had a hand in harming. Everything from bankruptcy assistance, judicial restructuring of mortgage terms, and frozen rates, to Billions in federal government foreclosure bailout monies are being suggested.
Now you can be sure, that none of the three candidates will ever say this. They’ll just use this as an excuse to give these financial institutions and the fickle home buyers more welfare.
