Politics takes a lot of brass. And Bill Clinton is a master
politician. His rousing speech at the Democrats’ convention told
the delegates that Republicans “want to go back to the same old
policies that got us into trouble in the first place.”
That is world class brass. Bill Clinton’s own administration,
more than any other, promoted an unsustainable housing boom, which
eventually and inevitably led to a housing bust that brought down
the whole American economy.
Behind all the complex financial processes that reached to Wall
Street and beyond, there is one fundamental fact: many people
stopped making their mortgage payments.
Why did that happen? Because mortgage loans were made to people
who did not meet the long-established qualification standards for
getting a mortgage loan. And why did that happen? Because the
Clinton administration threatened lawsuits against lenders who did
not approve mortgage loans to minority applicants as often as to
white applicants.
In other words, racial quotas replaced credit qualifications. A
failure to have racial statistics on mortgage approvals that fit
the government’s preconceptions was equated with
discrimination.
Attorney General Reno said that lenders who “closely examine
their lending practices and make necessary changes to eliminate
discrimination” would “fare better in this department’s stepped-up
enforcement effort than those who do not.” She said: “Do not wait
for the Justice Department to come knocking.”
Clinton’s Department of Housing and Urban Development (HUD) had
similar racial quota policies, and began taking legal actions
against banks that turned down more minority applicants than HUD
thought they should.
HUD said that it was breaking down “racial and ethnic barriers”
so as to create more “access” to home ownership. It established
“goals” — political Newspeak for quotas — for Fannie Mae and
Freddie Mac to buy mortgages that the original lenders had made to
“the underserved population.” In other words, the original lenders
could pass on the increasingly risky mortgages to Fannie Mae and
Freddie Mac — and, ultimately, to the taxpayers.
Other federal agencies warned mortgage lenders against having
credit standards that these agencies considered too high. And these
agencies had many powers to use against banks and other lenders who
did not heed their warnings.
The Federal Reserve Bank of Boston, for example, issued
guidelines for “non-discriminatory” lending which warned lenders
against “unreasonable measures of creditworthiness.” Lenders should
have standards “appropriate to the economic culture of urban
lower-income and nontraditional consumers” and consider
“extenuating circumstances.” In other words, when some people don’t
come up to the lending standards, then the lending standards should
be brought down to them.
What was the evidence for all the lending discrimination that
the government was supposedly trying to prevent? Statistics.
In the year 2000, for example, black applicants for conventional
mortgage loans were turned down at twice the rate for white
applicants. Case closed, as far as the media and the government
were concerned. Had they bothered to look a little deeper, they
would have found that whites were turned down at nearly twice the
rate for Asian Americans.
Had they bothered to check out average credit scores, they would
have discovered that whites had higher average credit scores than
blacks, and Asian Americans had higher average credit scores than
whites.
Such inconvenient facts would have undermined the whole moral
melodrama, reducing it to a case of plain economics, with lenders
more likely to lend to those who were more likely to pay them back.
Once lending standards were lowered, in order to meet racial
quotas, they were lowered for everybody. Deadbeats of any race
could get mortgage loans, and most were probably not
minorities.
Democrats like to blame the “greed” of business, rather than the
policies of government, for problems. But lenders don’t make money
by lending to individuals who don’t pay them back. That is what
government forced lenders to do, beginning under the Clinton
administration. And the eventual collapse took down the
economy.
It takes brass to defy the facts. And Bill Clinton has
brass.
