Discussing financial crisis, Buchanan baselessly blamed lending in "minority communities"
SUMMARY: On MSNBC, Pat Buchanan perpetuated the myth that government efforts to expand affordable housing to underserved communities caused the financial crisis, a charge that has frequently taken the form of attacks on the Community Reinvestment Act. In fact, as Fed chairman Ben Bernanke has stated: "Our own experience with CRA over more than 30 years and recent analysis of available data, including data on subprime loan performance, runs counter to the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties."
During the February 20 edition of MSNBC's Morning Joe, political analyst Pat Buchanan perpetuated the myth that government efforts to expand affordable housing to minorities caused the current financial crisis, asserting that "the feds leaned on banks and threatened some of these banks, 'You've got to make more loans,' and pushed them out -- you gotta help, frankly, in minority communities. And they pushed them out and the guys put nothing down and stuff, and then the banks sell the loans off to Fannie and Freddie." Host Joe Scarborough responded, "And that's what happened. Banks made bad loans. They sold it to Fannie and Freddie."
As Media Matters for America documented, the myth that the financial crisis was caused by federal pressure on banks to expand affordable housing to minorities and other underserved communities frequently takes the form of attacks on the Community Reinvestment Act (CRA). But actions taken by banks to expand lending to underserved communities, the focus of CRA, did not cause the financial crisis, according to Federal Reserve chairman Ben Bernanke, who stated in a November 25, 2008, letter: "Our own experience with CRA over more than 30 years and recent analysis of available data, including data on subprime loan performance, runs counter to the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties." Janet Yellen, president and CEO of the Federal Reserve Bank of San Francisco, stated in a March 2008 speech that "studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households."
Moreover, according to housing experts, a large percentage of subprime loans were not made by lenders governed by the CRA, which applies only to depository institutions. A study released in January 2008 by a law firm specializing in CRA compliance estimated that in the 15 most populous metropolitan areas, 84.3 percent of subprime loans in 2006 were made by financial institutions not governed by the CRA. Nor did actions by Fannie and Freddie cause the financial crisis, according to experts, including economist Dean Baker, who has stated:
Fannie and Freddie got into subprime junk and helped fuel the housing bubble, but they were trailing the irrational exuberance of the private sector. They lost market share in the years 2002-2007, as the volume of private issue mortgage backed securities exploded. In short, while Fannie and Freddie were completely irresponsible in their lending practices, the claim that they were responsible for the financial disaster is absurd on its face -- kind of like the claim that the earth is flat.
Buchanan's comments echo those of Boston Globe columnist Jeff Jacoby, who, as Media Matters documented, cited minority lending in a September 28, 2008, column. Also, on that day's edition of Fox News' Your World, host Neil Cavuto asked Rep. Xavier Becerra (D-CA), "[W]hen you and many of your colleagues were pushing for more minority lending and more expanded lending to folks who heretofore couldn't get mortgages, when you were pushing homeownership ... Are you totally without culpability here?" Cavuto later said, "I'm just saying, I don't remember a clarion call that said, 'Fannie and Freddie are a disaster. Loaning to minorities and risky folks is a disaster.' "
From the February 20 edition of MSNBC's Morning Joe:
BUCHANAN: The feds, Joe, the feds leaned on banks and threatened some of these banks, "You've got to make more loans," so the banks -- and pushed them out -- you gotta help, frankly, in minority communities. And they pushed them out and the guys put nothing down and stuff, and then the banks sell the loans off to Fannie and Freddie.
SCARBOROUGH: And that's what happened. Banks made bad loans. They sold it to Fannie and Freddie. Fannie and Freddie sold it to Wall Street.
DR. NANCY SNYDERMAN (NBC News chief medical editor): That's right.
SCARBOROUGH: They turned it into securities, chopped it up, sent it around the world, and here we are with the Dow Jones at its lowest rate since 1632.
It has to poor blacks. Otherwise people might blame rich, white bankers. God forbid that happens!!!
Why is it that Buchanan doesn't say poor or low-income communities? Is the problem that they didn't have enough money, or is there some character flaw being associated with skin color?
I know! Here in Pittsburgh there is a large Jewish 'minority' who buy houses and build buildings! I shall blame THEM for our crisis!!
I blame the Irish, the Germans, and the Chinese...
Buchanan is a racist plain and simple.
Because Pat's a racist.
Q:Let's talk about race in America. Pat: It's not my fault darkies rob people...
Jeez.... It only took Pukehandin six months to come up with THAT two sentence consise wrap up of why America is experiencing the worst economic crisis since the '30s.
SCARBOROUGH: They turned it into securities, chopped it up, sent it around the world, and here we are with the Dow Jones at its lowest rate since 1632.
I didn't know there WAS a Dow Jones in 1632..... :-)
Is there ANY number lower than 1632? In my chemistry course we called 1632 absolute zero!
Blame blacks first, the battle cry of the right.
They've been working that angle pretty hard, Snoop. One theme I kept hearing on wingnut radio was food stamps used as income for getting loans.
I don't know if there's any basis for this, maybe a household having a member getting support added to total income, but I was hearing this repeated as if unemployed people ( and we know who many wingnuts picture when they hear "unemployed people") were cruising into the bank and getting loans based on their foosd stamps.
That's so outrageous it's unbelievable, which is why after my time helping out at the local foodbank I totally believe wingnuts are fueling that fire. I've seen gullibility first hand and it comes warshipping a cross.
"I've seen gullibility first hand and it comes warshipping a cross." Snoop, one of the best typos in a while! And so true ;-)
I wondered if someone else would pick up on that! I knew if anyone would catch it it would be you!
I don't know about food stamps, but, according to "House of Cards" on CNBC, the long-standing practice of verifying income went out the window with a lot of these mortgage companies.
One lender they interviewed said that you could literally get a loan over the phone in about 20 minutes.
One of the people profiled was a Mexican immigrant (legal) who was making $900 a month and lied on his application to buy a $500,000 house. His assumption was the same as everyone else... that the house would go up in value fast enough that he could refinance and pull out the equity to pay down the loan.
True, this guy lied and deserves little sympathy, but the Mortgage Company did not bother to verify his income, so they share the blame, if you ask me.
Hi Ner,
If a mortgage originator does not confirm income, in a very strict sense, the originator is committing fraud. The originator is the main and most responsible party that should blamed for what are fraudulent loans. The fees they earn are partly to pay them for doing the research. The originators, appraisors and borrowers should all face criminal bank fraud charges. Then, the entity that buys the mortgage should have caught the non verification. It is these verifications and doulble checks that were thrown out in 2003.
Tonight we'll be talking with Earth Worm Jim, to basicly see which one of us can be more vocally hyperbolic!!
Thanx Mary I'm still laughing.
All the best in yer contest...sufferin' succotash!!!
I wonder if Snyderman knows as little about medicine as she does about economics.
Now that's saying somethin! That dame acts like the red queen in Alice in Wonderland...
He was close yesterday. The black professor had him on the edge.
I heard these idiots spouting off this morning. When I heard this I wanted to throw my shoe at the TV.... but since I can't afford a new TV, I abstained.
This is one of those clever little Republican lies that has just enough "truth" in it sooth their reptilian consciences. Yes, there were cases where the government encouraged banks to expand their loaning to minority communities, and, yes, Fannie and Freddie did sell loans to wall street.
What they're leaving out of their little fantasy is the fact that mortgage lenders and Wall Street investment banks got into the act, and once they realized how profitable these Mortgage Backed Securities could be, they went nuts.
It was Wall Street, not Congress or the Fed that was begging for more mortgages to sell. It got to the point that Mortgage Brokers were giving out loans to anyone with a pulse just to meet the demand and get their piece of the pie.
One lender interviewed by CNBC said that he knew it was all going to crash, but he got into these risky loans just to keep up with his competition. Sadly, when the bottom fell out, he lost his business anyway.
The idea that all of these risky loans were given out to satisfy some kind of liberal agenda is pure bullsh*t. It was all about making tons of money for Wall Street and the Mortgage companies.
That should be "lending", not "loaning". DOH!
I think I saw the one you're talking about. He was standing in a room full of what appeared to be stock brokers, ranting about how they didn't think they should have to bail out people who made bad decisions.
Supposedly, he was equally opposed to bailing out the banks, but I didn't see that particular tirade.
I guess all these Social Darwinists think we can just let the Housing Market implode, and the Rich people like him will just float to the top, like terds in a swimming pool.
I would disagree with , "It doesn't do anyone any good to have even more homes go into foreclosure". In my lines of work I bump up with some who are giddy that there are so many foreclosures, driving the price down at auctions so he can buy more places to add to his slumlord business. He brags that he does as much business in cash so that "Obama won't get my taxes". Then he brags that there will be more people with section 8 subsidies for him to rent too. What a d bag. Little does he know that his big mouth is going to cost him an IRS audit.
Its been on the country fair section twice so far.
I LOVE HOW THESE WHITE MEN LIKE RUSH, SHAW, AND PAT WHO RICH WHITE FRIENDS LIKE BUSH AND WALL STREET GOT US IN THIS MESS WILL ALWAYS PUT IT ON THE POOR MINORITY WHEN THEY MESS UP.
While I am of the opinion that bureaucrats like Bernanke, who only as recently as 2002 was appointed to the Board of Governors of the Federal Reserve System and only resigned from Princeton where he served as a professor of Economics up until 2006, is shading the government's involvement in this mess.
Even Wikopedia say that there is evidence that the Federal government leaned on the mortgage industry, including Fannie Mae and Freddie Mac to lower lending standards. Also, HUD mortgage policies fueled the trend towards issuing risky loans
Wikopedia goes on to say:
In 1995, the GSEs (Fannie Mae and Freddie Mac) began receiving government incentive payments for purchasing mortgage backed securities which included loans to low income borrowers. Thus began the involvement of the GSE with the subprime market. Subprime mortgage originations rose by 25% per year between 1994 and 2003, resulting in a nearly ten-fold increase in the volume of subprime mortgages in just nine years. The relatively high yields on these securities, in a time of low interest rates, were very attractive to Wall Street, and while Fannie and Freddie generally bought only the least risky subprime mortgages, these purchases encouraged the entire subprime market.
In 1996, HUD directed the GSE that at least 42% of the mortgages they purchased should have been issued to borrowers whose household income was below the median in their area. This target was increased to 50% in 2000 and 52% in 2005. From 2002 to 2006 Fannie Mae and Freddie Mac combined purchases of subprime securities rose from $38 billion to around $175 billion per year before dropping to $90 billion, thus fulfilling their government mandate to help make home buying more affordable. During this time, the total market for subprime securities rose from $172 billion to nearly $500 billion only to fall back down to $450 billion.
http://en.wikipedia.org/wiki/Subprime_mortgage_crisis#cite_note-118
So Buchanan and other conservatives have a good point. The actions by the government through these GSEs (Government Sponsored Enterprise) had a direct effect on the subprime market beyond what they themselves actually did. You might call it a "multiplier effect." :-)
Was the subprime lending in minority communities the straw that broke the housing market's back? No. But the lowered standards brought about to lend to minorities is analogous to Mrs. O'Leary's cow. We know the cow did not burn down Chicago. It only knocked over the lamp that started the fire. The lowering of the lending standards by the government and the actions of Fannie Mae and Freddie Mac had a direct effect on the rest of the market.. which in turn created and the housing bubble, speculation, and the ensuing crash.
How does the color of the borrower's skin influence their ability to pay it back? You consistently pay no attention to Bush's Ownership society and Phil Gramm's role in this crisis, why?
fried,
The purpose of the CRA and HUD policies were aimed at low income areas that were primarily in large city minority areas. I did not say in any post that the ability to repay was based on anyone's skin color. If you inferred that from my post, I apologize. You are misaken.
I reject your assertion that I do not pay any attention to Bush's role in this crisis. It only seems that way as the discussion seems to center around others attacking my position that the Democrats precipitated this mess with their insistance that lenders lower their lending standards. If others want to discuss Bush's role, that is fine with me.
Time flies and this subject of the housing meltdown and who is to blame is coming up on numerous threads. I don't remember where, but I do believe you posted a long quotation from some article as a reply to me in one of yesterday's threads talking about what Bush's part in this mess. I replied just a while ago that I do believe Bush bears some of the blame too.
My question to you might just be the same. Why do you never acknowledge Frank and Dodd's and the Democrats who blocked reform legislation in 2005?
"the Democrats precipitated this mess with their insistance that lenders lower their lending standards."
By what means? Legislation that was introduced after the fall of Bear Stearns that was never passed and never become law?
I put the blame squarely at the feet of Wall Street. It has to be regulated. We also need to come up with better economic indicators than Wall Street because too many Americans were losing while the Dow Jones was soaring to new heights.
I believe the 2005 legislation you speak of was addressed in those quotes that I posted. As you recall, Republicans controlled both houses in 2005, and, barring evidence of a Democratic filibuster, could have passed any legislation they wanted. Bush killed legislation in 2005, AA, from the NYT article I posted:
"By the spring of 2005 a deal with Congress seemed within reach, Mr. Snow, the former Treasury secretary, said in an interview.
Michael G. Oxley, an Ohio Republican and then-chairman of the House Financial Services Committee, had produced what Mr. Snow viewed as “a pretty darned good bill,” a watered-down version of what the president sought. But at the urging of Mr. Card and the White House economics team, the president decided to hold out for a tougher bill in the Senate.
Mr. Card said he feared that Mr. Snow was “more interested in the deal than the result.” When the bill passed the House, the president issued a statement opposing it, effectively killing any chance of compromise. Mr. Oxley was furious.
“The problem with those guys at the White House, they had all the answers and they didn’t think they had to listen to anyone, including the Treasury secretary,” Mr. Oxley said in a recent interview. “They were driving the ideological train. He was in the caboose, and they were in the engine room.”
From: http://www.nytimes.com/2008/12/21/business/21admin.html?n=Top/Reference/Times%20Topics/People/B/Becker,%20Jo&_r=1&adxnnl=1&pagewanted=5&adxnnlx=1235170135-VHUEanr+tC0zl83TI/G0tA
Even if Frank and Dodd opposed the legislation, Bush killed it.
This is where I got the idea you were attacking minorities, AA, from your previous post:
"Was the subprime lending in minority communities the straw that broke the housing market's back? No. But the lowered standards brought about to lend to minorities is analogous to Mrs. O'Leary's cow. "
fried,
Thanks for pointing out the last statement. I should have said low income.
Any thoughts on the rest of the post? Is that the 2005 legislation you were thinking about?
fried,
The Senate needed to overcome the 60 vote cloture to get the bill into law. All the Democrats voted against it in committee.
Here is an interesting quote:
In April 2005, the Bush Administration managed to get the Senate Banking committee to approve regulation for Fannie and Freddie, with all Republicans voting for regulation and all Democrats voting against regulation. The measure failed because in the Senate you need 60 votes to pass a measure and the Republicans did not have 60 members. This bill could have prevented a number of the problems we are experiencing currently.
...In 2006 Senate Republicans tried again with another bill co-sponsored by John McCain. Again party line voting blocked the measure - Democrats, now in the majority, were in lock step to block regulation. In September 2008, Chris Dodd told his colleagues in the Senate that this entire calamity was foreseeable and preventable. Between 2005 and 2008 Fannie and Freddie added a trillion dollars of these securities.
http://brokengovernment.wordpress.com/2008/10/05/democrats-out-politician-the-republicans-with-our-financial-crisis/
AA,
Bush killed the bill in 2005, just ask Oxley.
In 2006, check this out: http://www.politifact.com/truth-o-meter/article/2008/sep/17/mccains-warning-fannie-and-freddie/
Here is what the AEI thought in 2006 of the measure McCain was behind. They thought it was WORSE than the current law. They're not liberal:
http://www.aei.org/publications/pubID.22705/pub_detail.asp
Bush thought it was too weak too:
http://www.presidency.ucsb.edu/ws/index.php?pid=24851
Like what?
The Senate Bill (S190) in 2005 never left committee, there was never a question of cloture. Also, the 60 vote cloture rule only applies if there is a filibuster. Without that only 51 votes are needed in a full Senate session to pass any law. Your source here is either extremely mistaken or intentionally lying. It doesn't really matter which because it is simply wrong.
Exactly, 60 only seems like a requirement since January 2007.
"The purpose of the CRA and HUD policies were aimed at low income areas that were primarily in large city minority areas." People make the false assertion that low income means minority. There are in fact a larger number of poor whites than poor minorities. CRA in no way address lending to minorities other than they can't be discriminated against. CRA purely deals with low-moderate income borrowers and census tracts. What you also fail to realize is in a city like Washington, DC 80% of the city is low to moderate census tracts. I did loans in these areas to Drs. & Lawyers with high six figure incomes in luxury condo buildings that counted as CRA loans. As Bernanke states in a letter to Rep Mendez, there is no discernable link between CRA and the housing crisis. Do a search for Fed Board of Governors and CRA.
Wikipedia isn't a source.
But hey, what do you care - you believe things that just aren't true, so why should you deal in facts?
Wikipedia isn't a source.
That's why Barney always uses WikOpedia.
Seriously,he's been copy & pasting Wiki entries on a regular basis here for a few years and still can't spell the name of his primary source. That should give you a little insight as to his eye for detail and accuracy.
I thought he used reichopedia?
Damian,
Just because you prefer to put your head in the sand, does not mean wikopedia does not exist. You are free to disagree with its content, (as sometimes I do,) but I doubt you even checked the link.
Wikopedia doesn't exist.
As pointed out above Fannie and Freddie started out small and got smaller while the bubble grew.
wookie,
Yeah. Right.
By 2008, the GSE owned, either directly or through mortgage pools they sponsored, $5.1 trillion in residential mortgages, about half the amount outstanding.
(see the Wikopedia link above.)
NEW YORK (Reuters) - Fannie Mae and Freddie Mac, the largest providers of funding for U.S. home mortgages...
http://www.reuters.com/article/marketsNews/idUSN1625475420081216
What does this have to do with anything?
Secondly, he was talking about risky loans.
Defaults exposing truth of "liar's loans"
The no-worries lending that inflated the housing bubble is resulting in a flood of soured option-ARM loans, adjustable-rate mortgages that allow borrowers to pay so little every month that their loan balances rise rather than fall, sometimes sharply.
Numbers from industry trackers suggest that these borrowers — most of whom boast respectable, often top-tier credit scores and appear to have substantial incomes and home equity — are starting to create a second tide of defaults in addition to the subprime-loan meltdown.
{Snip}
The option ARM trouble stems from the loose lending practices that inundated the subprime business. Loans often were granted on the basis of stated income, not proof of a borrower's income, giving rise to their nickname, "liar's loans."
"This is not a subprime crisis. This is a stated-income crisis," said Robert Simpson, chief executive of Investors Mortgage Asset Recovery in Irvine, Calif., which works with lenders, insurers and investors to recover losses related to mortgage fraud.
{Snip}
Simpson said loan officers routinely inflated earnings of workers with regular paychecks. On some written requests to confirm a borrower's employment, officers would specify that an employer should not provide a salary figure, he said.
Now the delinquencies are piling up.
The more recent loans appear to be faring the worst, reaffirming the conclusion that lending standards had become overly lax throughout the mortgage industry in recent years, as competition for fewer good loans intensified amid skyrocketing home prices.
http://seattletimes.nwsource.com/html/businesstechnology/2004125368_liarloans15.html
I'm beginning to think that talking to a brick wall would be a delight in comparison to pointing the same thing to you over and over again.
Moon,
I don't know why? I have stated over and over again that I don't disagree with the contention that is the subject of your post.
Perhaps you are the brick wall?
Democrats precipitated this mess with their insistance that lenders lower their lending standards
AA-a few messages back
THAT'S WHY!
I've tried over and over again to show you that many banks and lenders voluntarily lowered their standards because they wanted to profit on the derivitives and they figured even if they ended up owning a bunch of defaulted houses the real estate bubble would make them come out ahead. If FM/FM was the only agency having problems that would not have resulted in the current economic meltdown.
Or, to use your Chicago Fire analogy, if the Feds and FM/FM are the cow then Wall Street is O'Leary's neighbor who didn't think that storing hundreds of gallons of kerosene in a wood building in a densely populated area would be a problem.
Rick Santelli, who AA and his fellow wingnuts have embraced as a hero who speaks truth to power, said the same thing today, that the fault doesn't lie with subprime loans but with the derivatives.
I would love to be able to see that play out in Barney's head.
The idiot who put the lamp in a position to be knocked over by a cow is to blame. It's like having children in your home and leaving a gun on top of the SpongeBob DVD.
But baseless attacks is all he has left. If you take that away from him, live every other brain-dead gop slimeball, he'll have nothing.
jw,
As opposed to your well reasoned and informed post?
hahaha...
Here is an interesting link that explains how and why the government is to blame for causing this housing debacle.
It is entitled, How the Subprime Mortgage Mess Began" by Jim Haughey, chief economist at Reed Construction Data.
http://www.reedconstructiondata.com/jim-haughey/post/how-the-subprime-mortgage-mess-began/
From your article:
"The AAA rating was an illusion that was ignored by bank regulators, the overseers of pension funds and the Securities and Exchange Commission."
There's your nugget. That is what turned the subprime problem into a worldwide financial tsunami.
If any criminal charges arise from this, I predict it will be within the rating agencies.
Wall Street greed brought us here. The CRA may have greased the wheels, but Wall Street pushed us down the hill.
I read the article and I don't disagree with much of it but I do think the author came to the wrong conclusion based on the information he presented.
http://www.reedconstructiondata.com/jim-haughey/post/how-the-subprime-mortgage-mess-began/
He does mention the 1995 change which allowed slicing and dicing the subprime loans into other securities. The default rate was acceptable to that point, according to him. Its effect seems somehow to have eluded him. Though a number of posts on that column bring it up.
This always happens when you let the rif-raf into the american dream. Would be his shortened message.
It's a good read with the exception of the concluding paragraph.
I guess your motto is :" Never let a good lie die" . These arguments are not new. This from "Washington Monthly":
ARE WE STILL STUCK IN OCTOBER?.... Watching conservatives talk about the economic crisis, the arguments start to have a certain "Groundhog Day" quality.
Karl Rove blasted President Obama on Fannie and Freddie from 2005. Phil Gramm insisted he's not to blame, but CRA and Fannie/Freddie are. Last night, Bill O'Reilly blasted Rep. Barney Frank (D-Mass.) for "pumping it that poor people ought to be given mortgages 'cause everybody has a right to a house."
All of these arguments, from just the past few days, are obviously wrong. But more importantly, these are the same arguments the same characters were making in October, when they were also debunked and proven baseless.
When I saw Media Matters' item noting Pat Buchanan blaming "minority communities" for the financial crisis, I had to triple-check the date to make sure it wasn't a piece from last year.
Didn't we already have this debate? Isn't it already clear that the conservative talking points were wrong in October, and haven't improved with age?
I suspect most of these conservative media personalities know their arguments are wrong, but haven't quite come up with anything new yet. So, they recycle the old talking points, discredited though they may be.
It's kind of sad, really.
—Steve Benen 9:20 AM Permalink | Trackbacks | Comments (22)Rush Limbaugh and his Rat-Pack of Right-Wing Media Hyenas are now fulminating about Obama's new Foreclosure Assistance Bill which they say will help the "Losers" in our society. Homeowners who are now in default on their mortgages are America's "Losers", and do not deserve any assistance from taxpayers. This is Rush's idea of Dog-Eat-Dog, Winner-Take-All, Losers-Be- Damned Capitalism. The fact that Rush's plan would fill our streets and shelters with thousands more homeless families, and leave banks holding empty worthless homes with no payments being made to the banks at all doesn't seem to matter. Rush has an Ayn Rand "Fountainhead" ideology to defend, and he will defend that Far Right Extremist ideology to America's last dying breath. Well, in case Rush hasn't noticed, "Losers" are what the Republicans were in 2006 and, even more so, in 2008. By 2010 and 2012, Obama and the Democrats will own the Stimulus Bill and the Homeowners Assistance Bill, both of which will probably have proven very successful by then. The Republicans will own the title of Obstructionist Destructionists, in light of their fierce opposition to these recovery programs. And, by that time, the GOP and the Right-Wing will be the biggest Losers of all. If you think Republicans are Losers today, wait until 2012 -- "You Ain't Seen Nothin' Yet."
Please visit my Blog: "Conservatives Are America's Real Terrorists"
http://conservativesarecommunistss.blogspot.com/