The meltdown by Congressman Joe Walsh (TParty/GOP IL), during a town hall session in which constituents ask about bank accountability, is all over the “Internets,” but we need to give it a bit of context. Walsh isn’t the only one pushing the Big Lie, i.e. that those icky little irresponsible borrowers were the perpetrators of the Great Fraud which precipitated the Great Recession. Let’s put some pieces together.
Congressman Walsh’s histrionics weren’t all that far removed from New York City Mayor Mike Bloomberg’s response to the Occupy Wall Street protesters:
“I hear your complaints,” Bloomberg said. “Some of them are totally unfounded. It was not the banks that created the mortgage crisis. It was, plain and simple, Congress, who forced everybody to go and give mortgages to people who were on the cusp. … (T)hey were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will. … And now we want to go vilify the banks because it’s one target, it’s easy to blame them and Congress certainly isn’t going to blame themselves.”
There they go again. Banks haven’t been happy with the Community Reinvestment Act of 1977 since its passage nearly 35 years ago. That it is an old target doesn’t mean it’s a good one. For one thing, the timing is off:
“The Community Reinvestment Act, passed in 1977, requires banks to lend in the low-income neighborhoods where they take deposits. Just the idea that a lending crisis created from 2004 to 2007 was caused by a 1977 law is silly. But it’s even more ridiculous when you consider that most subprime loans were made by firms that aren’t subject to the CRA.” [BusWeek]
Yes, approximately 50% of the subprime mortgages were produced by mortgage servicers who are not subject to the Community Reinvestment Act, and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations. [BusWeek]
So, the timing is way off and the banks subject to the Community Reinvestment Act weren’t the institutions creating the subprime loans. Perhaps if we repeat the truth of the matter often enough low information financialist fanatics will get the message?
Congress made them do it? Once more: There are two popular targets financialists like to fire at in order to divert attention from their complicity and possible criminality in the mortgage securitization inflating the housing bubble. Target one – “Congress pushing homeownership.” Target two – “Fannie and Freddie, the inept mortgage twins.”
There’s been just a bit of revisionism going on, for example AEI’s Peter Wallison, a champion of financialism and deregulation said the mortgage twins weren’t doing enough in 2004:
“In recent years, study after study has shown that Fannie Mae and Freddie Mac are failing to do even as much as banks and S&Ls in providing financing for affordable housing, including minority and low income housing. After studying the issue for years, HUD has finally proposed regulations that would tighten the definitions of such terms as “low and moderate income,” “underserved areas,” and “very low income families.” Then HUD set a goal that required Fannie and Freddie to devote increasing percentages of their total business to assisting families in the affected groups to become home owners.” [GEI](emphasis added)
And, who was pushing the Ownership Society? The one in which, “Stocks, the trendy investment of the 1990s, have been replaced by housing. Unlike stocks, homes can be purchased by strapped individuals with borrowed money. Nobody will lend you $500,000 to buy stocks with no money down. But assuming you have a pulse and are willing to pay some interest, there are probably 40 lenders waiting to write you a check for a mortgage on the same terms. ” [Slate 2006]
Finally, someone should remind Mayor Mike Bloomberg that Fannie and Freddie are in the SECONDARY mortgage market — they don’t make loans to homeowners. [someone has]
Speaking of targets. The Republican apologists for the financialists would have us believe that anyone, everyone, anybody was responsible for the Great Recession — except the ones who were actively involved in pouring money into mortgage operations with the intent to park the mortgages in trust accounts, thence to slice and dice them into artificially AAA rated (issuer pays) CDOs for sale to institutional investors, hedge funds, and anyone else upon whom they could be foisted.
How many times will it be necessary to post these facts and explanations? As many times as the financial apologists try repeating their hypnopaedic line “Some Other Dude Did It.” Contrary to Walsh, Bloomberg, and other financialism fanatics — the Occupy protesters are, indeed, aimed at the right target.
