Posts Tagged ‘mortgage’


Mortgage Plans Turn Economics Upside-Down

February 19, 2009

Mortgage Plans Turn Economics Upside-Down

By THOMAS SOWELL | 19 Feb. 09

From television specials to newspaper editorials, the media are pushing the idea that current economic problems were caused by the market and that only the government can rescue us.

What was lacking in the housing market, they say, was government regulation of the market’s “greed.” That makes great moral melodrama, but it turns the facts upside down. It was precisely government intervention that turned a thriving industry into a basket case.

An economist specializing in financial markets gave a glimpse of the history of housing markets when he said: “Lending money to American homebuyers had been one of the least risky and most profitable businesses a bank could engage in for nearly a century.”

That was what the market was like before the government intervened. Like many government interventions, it began small and later grew.

The Community Reinvestment Act of 1977 directed federal regulatory agencies to “encourage” banks and other lending institutions “to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of such institutions.”

That sounds pretty innocent and, in fact, it had little effect for more than a decade. However, its premise was that bureaucrats and politicians know where loans should go, better than people who are in the business of making loans.

The real potential of that premise became apparent in the 1990s, when the Department of Housing and Urban Development imposed a requirement that mortgage lenders demonstrate with hard data that they were meeting their responsibilities under the Community Reinvestment Act.

What HUD wanted were numbers showing that mortgage loans were being made to low-income and moderate-income people on a scale that HUD expected, even if this required “innovative or flexible” mortgage eligibility standards.

In other words, quotas were imposed — and if some people didn’t meet the standards, then the standards needed to be changed.

Both HUD and the Department of Justice began bringing lawsuits against mortgage bankers when a higher percentage of minority applicants than white applicants were turned down for mortgage loans.

A substantial majority of both black and white mortgage loan applicants had their loans approved, but a statistical difference was enough to get a bank sued.

It should also be noted that the same statistical sources from which data on blacks and whites were obtained usually contained data on Asian-Americans as well. But those data on Asian-Americans were almost never mentioned.

Whites were turned down for mortgage loans more often than Asian-Americans. But saying that would undermine the reasoning on which the whole moral melodrama and political crusades were based.

Lawsuits were only part of the pressures put on lenders by government officials. Banks and other lenders are overseen by regulatory agencies and must go to those agencies for approval of many business decisions that other businesses make without needing anyone else’s approval.

Government regulators refused to approve such decisions when a lender was under investigation for not producing satisfactory statistics on loans to low-income people or minorities.

Under growing pressures from both the Clinton administration and later the George W. Bush administration, banks began to lower their lending standards.

Mortgage loans with no down payment, no income verification and other “creative” financial arrangements abounded. Although this was done under pressures begun in the name of the poor and minorities, people who were neither could also get these mortgage loans.

With mortgage loans widely available to people with questionable prospects of being able to keep up the payments, it was an open invitation to financial disaster.

Those who warned of the dangers had their warnings dismissed. Now, apparently, we need more politicians intervening in more industries, if you believe the politicians and the media.


Thumbs Down On Bailouts For Autos, Banks And Mortgage Holders

December 29, 2008

Thumbs Down On Bailouts For Autos, Banks And Mortgage Holders”  – Yet the American majority still were overruled by the minority? – Liberals claim we are a democracy – even though our Founding Fathers did all they could do to found America as a republic.  They knew that democracies were dangerous to liberty.

Americans must read history – just go back to Germany at it’s collapse – remember the pictures – wheelbarrows full of Deutchmarks for a loaf of bread!



IBD/TIPP Poll: Thumbs Down On Bailouts For Autos, Banks And Mortgage Holders

IBD 9 Dec. 08

Sixty-three percent of Americans surveyed in the latest IBD/TIPP Poll — including 66% of investors, 59% of Midwesterners and even 53% of Democrats — disapprove of financial aid for U.S. automakers. Respondents also opposed bailouts for banks and other financial institutions by 53% to 45.5%, with only Democrats and Midwesterners in favor. They were more ambivalent, with 50% opposed and 45% in favor, when it comes to mortgage holders. Help for state and local governments won grudging approval. Republicans were opposed across the board.

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