<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<HTML><HEAD>
<META http-equiv=Content-Type content="text/html; charset=ISO-8859-1">
<META content="MSHTML 6.00.6000.16711" name=GENERATOR></HEAD>
<BODY id=role_body style="FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Arial"
bottomMargin=7 leftMargin=7 topMargin=7 rightMargin=7><FONT id=role_document
face=Arial color=#000000 size=2>
<DIV><BR>
<DIV id=yiv294074235>
<TABLE width=550 border=0>
<TBODY>
<TR>
<TD align=left bgColor=white>
<DIV align=center><IMG height=59 alt=AlterNet
src="http://www.alternet.org/images/site/logo.gif" width=173 align=middle
border=0></DIV>
<H2 style="MARGIN: 20px 0px 0px">11 Racist Lies Conservatives Tell to
Avoid Blaming Wall Street for the Financial Crisis</H2>
<H5 style="MARGIN: 0px 0px 20px">By Sara Robinson, Campaign for America's
Future<BR>Posted on October 2, 2008, Printed on October 5,
2008<BR>http://www.alternet.org/story/101127/</H5>
<DIV>Conservative pundits and politicians have piled onto the excuse like
shipwreck victims clinging to a passing log: The real blame for the
current economic crisis, conservatives would have you believe, lies not
with anything they did, but rather with the 1977 Community Reinvestment
Act -- a successful Carter-era program designed to get banks to stop
covert discrimination, and encourage them to invest their money in
low-income neighborhoods.</DIV>
<DIV>It's always easy to tell when the cons are completely lost at sea.
The lies get more absurdly preposterous -- and also more transparently
self-serving. But when they go so far as to openly and unapologetically
latch onto race and class as an excuse for their woes (which this is, at
its heart), you know they're taking on water fast -- and scared of going
under entirely.</DIV>
<DIV>You can hear the conservative commentators burbling this CRA fable
from the Wall Street Journal to the National Review; from Rush to YouTube.
Neil Cavuto put the essence of th e argument right out there on Fox News:
"Loaning to minorities and risky folks is a disaster." See! It's all the
liberals' fault for insisting on social justice!</DIV>
<DIV>Conservatives are twisting the facts beyond the breaking point to
support their revisionist history. But don't be fooled: the financial
crisis was caused by conservative financial follies and bankers run amok
and nothing more. Here are the basic myths they're trying to push about
the CRA -- and the facts that will enable you to fire back.</DIV>
<DIV><STRONG>1. The CRA was a liberal boondoggle designed to con banks
into funding housing for undeserving, unqualified
minorities.</STRONG></DIV>
<DIV><STRONG>False.</STRONG> The Community Reinvestment Act of 1977 was
the result of decades of disinvestment in poor and working-class
neighborhoods. It was designed to put an end to "red-lining" -- a
widespread practice in which banks refused to write mortgages for houses
in certain neighborhoods, no matter who was applying or how creditworthy
they were.</DIV>
<DIV>
<DIV>The Fair Housing Act of 1968 had made it illegal for real estate
agents and banks to discriminate against homeowners on the basis of race.
Red-lining soon emerged as a not-so-subtle way to continue this
discrimination, by declaring, ahem, certain neighborhoods as unfit to
invest in. By 1977, the results of this practice were becoming all too
obvious, so Congress stepped and gave lenders a choice: if you want the
FDIC to insure your deposits, you need to knock off the redlining. </DIV>
<DIV>The CRA didn't force lenders to make riskier loans than they would
have otherwise. It simply required that they take each applicant on his or
her own merits, and give people in poorer neighborhoods the same fair
chance at a mortgage that everybody else in town was getting. It wasn't
about preferential treatment. It was just about basic equality.</DIV>
<DIV><STRONG>2. The CRA forced banks to lower their standards and make
loans to all low-income families and people with poor credit -- and find
banks that refused to comply.</STRONG></DIV>
<DIV><STRONG>No.</STRONG> The CRA has encouraged banks to lend fairly and
responsibly for over 30 years. It does not impose fines. It does
periodically examine FDIC-backed banks, and issues them a CRA compliance
rating. A highly-rated bank must meet the financing needs of as many
community members as possible, and must not discriminate against racial
and ethnic groups or certain neighborhoods. However, a bank will not
receive a high rating unless it is also maintains "safe and sound banking
practices."</DIV>
<DIV>In other words, the CRA requires banks to lend to working-class
families and people of color -- but only when those people have been
deemed as creditworthy as anyone else.</DIV>
<DIV><STRONG>3. The housing bubble burst when too many people with home
loans mandated by the Community Reinvestment Act failed to make their
mortgage payments. </STRONG></DIV>
<DIV><STRONG>False.</STRONG> The CRA only applies to FDIC member banks and
thrifts. Back in the 1970s, these institutions were responsible for most
of the country's mortgage lending. But starting in the 80s and on up to
the present, we saw a huge boom in lending businesses-- such as finance
companies like Countrywide -- that weren't banks, and didn't take deposits
that required FDIC insurance. Thus, they didn't have any obligation to the
CRA. And they were free to set their own lending standards, which were
often far less cautious than those required of FDIC-insured banks.</DIV>
<DIV>
<DIV><STRONG>4. The bulk of the "junk" loans that have been packaged into
mortgage-based securities are CRA loans.</STRONG></DIV>
<DIV><STRONG>False.</STRONG> An analysis of Home Mortgage Disclosure Act
(HMDA) data in the country's 15 biggest metropolitan areas found that
84.3% of the high-cost loans made in 2006 were originated by non-CRA
lenders -- including 83% of high-cost loans to low- and moderate-income
individuals. The Federal Reserve notes that, across the country, non-CRA
lenders were twice as likely as CRA lenders to issue subprime loans to
vulnerable borrowers. Furthermore, the Fed also reports that responsible
mortgages made by CRA lenders have about the same low rate of foreclosure
as other traditional mortgages.</DIV>
<DIV><STRONG>5. If the government had just set the lenders free to do
their thing, the market would have prevented this. It's just another
example of how government oversight always leads to market
failure.</STRONG></DIV>
<DIV><STRONG>Wrong again, buckaroo.</STRONG> As explained just above, up
to four-fifths of these loans were issued by financial institutions that
operated with little or no federal regulatory oversight. In fact, in 2006,
only one of the top 25 subprime lenders was a CRA institution. A few
others were mortgage/finance company affiliates of CRA-covered lenders;
but even these were separate businesses that didn't operate under CRA
rules (including Countrywide, CitiMortgage, and Wells Fargo Home
Mortgage). Likewise: the vast majority of the top 20 issuers of risky
interest-only and option ARM loans were not CRA-affiliated lenders.</DIV>
<DIV>If anything, the CRA example proves -- once again -- that government
oversight not only works; it's essential to maintain safe and sane capital
markets.</DIV>
<DIV><STRONG>6. The CRA is just another failed liberal handout
program.</STRONG></DIV>
<DIV>
<DIV><STRONG>No.</STRONG> The benefits of CRA have been substantial.
Robert Rubin recently estimated that the law has channeled upwards of $1
trillion into distressed neighborhoods across the country -- including
both inner cities and rural areas without much access to investment funds
-- without putting up any taxpayer money beyond what it takes to operate
the CRA itself. In these areas, home ownership is up -- and with it, the
local tax base, which means more parks, more cops, more street repairs,
and so on. There's more decent rental housing, too, because landlords can
get loans for upgrades and improvements.</DIV>
<DIV>Small business ownership is also up. Low-income communities have
become more attractive to outside investors, and more able to support
community redevelopment efforts. And in places where people once cashed
their paychecks at the convenience store and depended on payday loans,
there are now full-service bank branches offering the same affordable
financial services people in better neighborhoods take for granted.</DIV>
<DIV>The cons like to talk about the "ownership society." There is no
ownership without access to capital. For 30 years, the CRA has been making
private capital available to qualified people who want to bootstrap
themselves into home and business ownership, and a secure place in the
middle class.</DIV>
<DIV><STRONG>7. OK -- if it works so well, why do we still need it?
Haven't the banks finally figured by now out that redlining was a stupid
idea?</STRONG></DIV>
<DIV><STRONG>If only.</STRONG> The very fact that the conservatives are
trying to blame the mess on the CRA is, in itself, ample proof that we
still need anti-redlining laws on the books. Fifty years into the civil
rights era, and they're still arguing that it should be acceptable to
permanently exclude people from the capital markets on the basis of race
and class. Different millennium, same ugly story: "See? This is what
happens when you give money to minorities and poor people. You end up
wrecking the country!"</DIV>
<DIV>In other words: no, they haven't learned their lesson; and yes, they
still believe in red-lining as much as they ever did. Racism is alive and
well, and there are still plenty of Americans w ho would bring back
housing discrimination in a heartbeat if the law allowed them to. Which is
precisely why we can't allow them to.</DIV>
<DIV>
<DIV><STRONG>8. If we can't blame the CRA, then who can we blame? How
about the federal banking agencies, which outright told banks to go ahead
and adopt risky lending practices? In particular, a 1992 Boston Federal
Reserve Bank publication, <EM>Closing the Credit Gap: A Guide to Equal
Opportunity Lending</EM>, told the banks that it was OK to adopt unsound
lending practices.</STRONG></DIV>
<DIV><STRONG>Nice try, but still wrong.</STRONG> According to the National
Community Reinvestment Association, the document cited above offered three
new guidelines to lenders -- none of which are applicable to the current
subprime crisis.</DIV>
<DIV>The first guideline was that the lack of proper credit history
shouldn't be counted as a negative factor for potential homebuyers. Banks
could use other evidence to assess the borrower's payment habits,
including the timely payment of rent, utility bills, and other scheduled
loans. Borrows still need to prove that they're reliable; they're just
allowed to use documentation besides a credit report.</DIV>
<DIV>The second was to remind bankers that some households with debt
ratios above the standard 28/36 criteria might still qualify for home
loans. This guideline is very conservative by today's standards. Many
problematic subprime loans were granted to borrowers with debt-to-income
ratios above 50 percent, which was in no way sanctioned by t he 1992
guidance document.</DIV>
<DIV>The third was that lenders could count Social Security, second jobs,
and other verifiable income streams as valid sources of income when
evaluating loan applications. But most subprime loans failures aren't
related to alternative income sources. The real problem has been with
"liars' loans," in which the reported income streams are never verified at
all.</DIV>
<DIV><STRONG>9. Well, then...it must be Bill Clinton's fault, right? In
1995, Clinton changed the Community Reinvestment Act to allow the
securitization of CRA and subprime mortgages. That's what started all
this.</STRONG></DIV>
<DIV>
<DIV><STRONG>Talking point regurgitation at its worst.</STRONG> The 1995
revisions to the CRA only changed the way in which a bank's CRA compliance
is evaluated. They made no mention of mortgage securitization at all.
Under the 1995 rules, banks are rewarded only for making mortgages in
their communities, not for re-selling mortgages as securities.</DIV>
<DIV><STRONG>10. OK, then -- it's the Democratic Congress's fault!
President Bush and Senator McCain tried to stop the subprime mortgage
crisis, but Democrats blocked their efforts.</STRONG></DIV>
<DIV><STRONG>It's not lying. It's a gift for fiction.</STRONG> This one's
actually made it into a TV ad. The claim is that Bush and McCain supported
the Federal Housing Enterprise Regulatory Reform Act of 2005, which would
have created a new government agency to oversee Fannie Mae and Freddie Mac
and other federal housing programs.</DIV>
<DIV>Howe ver, there's no pony in this manure pile. This bill would have
done nothing to stop the rash of subprime lending that preceded the
housing bubble. It only provided oversight for Fannie and Freddie -- but
it said nothing at all about the companies that issued subprime
mortgages.</DIV>
<DIV><STRONG>11. No serious conservative economist would have ever
approved of the CRA.</STRONG></DIV>
<DIV><STRONG>False.</STRONG> In March 2007, Federal Board Chairman
Bernanke -- no liberal he -- noted that CRA has helped institutions
discover and enter new markets that may have been previously under-served
and ignored by insured depositories.</DIV>
<DIV>
<DIV>These myths are floating around everywhere this week -- a Big Lie
that's being repeated so often that Americans may well start to believe
it. The real objective of the "blame the CRA" campaign is to pre-emptively
discredit any future progressive proposals that involve using government
regulation to make the capital markets behave -- and to get the
free-market fundamentalist faithful back in the fold.</DIV>
<DIV>Time to fire back, and replace the Big Lie with some real truth.
</DIV>
<DIV><I>Sara Robinson is a twenty-year veteran of Silicon Valley, and is
launching a second career as a strategic foresight analyst. When she's not
studying change theories and reactionary movements, you can find her
singing the alto part over at Orcinus. She lives in Vancouver, BC with her
husband and two teenagers. </I></DIV>
<H5 style="MARGIN: 30px 0px 20px">© 2008 Campaign for America's Future All
rights reserved.<BR>View this story online at:
http://www.alternet.org/story/101127/</H5></DIV></DIV></DIV></DIV></DIV></DIV></TD></TR></TBODY></TABLE>
<DIV class=aol_ad_footer id=MAILCIADA034-886748e94861332><FONT
style="FONT: 10pt ARIAL,; COLOR: black">
<HR style="MARGIN-TOP: 10px">
McCain or Obama? Stay updated on coverage of the Presidential race while you
browse - <A
title=http://toolbar.aol.com/elections/download.html?ncid=emlweusdown00000001
href="http://toolbar.aol.com/elections/download.html?ncid=emlweusdown00000001"
target=_blank rel=nofollow>Download Now</A>!</FONT>
</DIV></DIV><BR></DIV></FONT><BR><BR><BR><DIV><FONT style="color: black; font: normal 10pt ARIAL, SAN-SERIF;"><HR style="MARGIN-TOP: 10px">New <B>MapQuest Local</B> shows what's happening at your destination. Dining, Movies, Events, News & more. <A title="http://local.mapquest.com/?ncid=emlcntnew00000001" href="http://local.mapquest.com/?ncid=emlcntnew00000001" target="_blank">Try it out</A>!</FONT></DIV></BODY></HTML>