As an example of this kind of behavior, two stories highlight the fact that the Obama administration is still trying to get bankers to lend more money to minorities–minorities who by definition aren’t credit-worthy, or the bankers would want to lend to them. (Japanese-Americans, by contrast, have little difficulty getting mortgages.) Hans Bader writes at Examiner.com that
government-sponsored mortgage giants Fannie Mae and Freddie Mac, and by federal affordable-housing mandates. But Obama’s proposed financial rules overhaul does absolutely nothing about Fannie and Freddie, admits Obama’s Treasury Secretary, tax cheat Timothy Geithner, even though he admits that “Fannie and Freddie were a core part of what went wrong in our system.” Worse, Obama’s plan is “largely the product of extensive conversations” with two lawmakers responsible for the corrupt status quo, Chris Dodd and Barney Frank, and it expands the reach of regulations that have been used by left-wing groups to extort pay-offs from banks.In the American Spectator, Matthew Vadum writes
(Fannie Mae engaged in massive fraud and political bullying to thwart reform. It and Freddie Mac lost so much money gambling on the housing market that they were taken over by the Federal Housing Finance Agency, which took them over in the name of ending their risky practices, but instead actually increased their purchases of risky mortgage loans in an effort to artificially prop up the housing market. Obama made Freddie Mac lose $30 billion more after the takeover in order to write off mortgage loans to delinquent mortgage borrowers.)[More]
So while the government’s push for minority lending has brought down the world financial system, the Obama administration wants to do it again, because they’re still worried about racism in the mortgage industry. It’s like what Talleyrand said about the French royal family after the Revolution was over:“They have learned nothing and forgotten nothing.”
Well, the administration didn’t use those words exactly, but in the interests of greater governmental transparency maybe it should have.
That’s because there is no doubt that the Carter-era Community Reinvestment Act (CRA) and other boneheaded government policies helped to create the subprime mortgage bubble that violently burst and that continues to wreak havoc on the world’s financial markets. CRA allowed activists to blackmail lenders into handing out mortgages to people with little regard for their ability to keep up payments.
Yet the Obama administration is now demanding that the bank-killing CRA, which in practice has been used to emphasize a largely race-based version of financial so-called social justice at the expense of sound banking practices, be strengthened.
The administration laid out its counterintuitive position in the Treasury Department’s new white paper, “Financial Regulatory Reform: A New Foundation,” which calls for the creation of a new super-duper-regulator, the Consumer Financial Protection Agency (CFPA).
My American Spectator colleague Joseph Lawler, who has his own doubts about the destructive power of the CRA, has a delightfully simple way of summing up the problems with the law:
“[T]he CRA was either potentially harmful or useless. Does it make sense to include provisions for expanding a harmful or useless measure in a regulatory overhaul?“[More]