Tuesday, October 14, 2008

The Private Sector Caused The Mortgage Crisis (Not Minorities, ACORN Or Other Conservative Lies)

H/T to Oliver Willis

As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.

Commentators say that’s what triggered the stock market meltdown and the freeze on credit. They’ve specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie’s and Freddie’s financial problems.

Federal housing data reveal that the charges aren’t true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.

Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height vrom 2004 to 2006.

Federal Reserve Board data show that:

_ More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

_ Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

_ Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that’s being lambasted by conservative critics

I don’t expect this to stop the explicitly pro-racist arguments being pushed right now by McCain, the RNC, and conservatives. But this is the reality.


Black Diaspora said...

As you've probably learned by now, the problem was not with subprime mortgages per se, but with the "side bets" called Credit Default Swaps, an insurance of a sort to entice investors to invest into these risky subprime mortgages that were bundled as investment instruments.

Since these swaps technically weren't insurance, they did come under the usual regulatory scrutiny.

Because the companies offering these swaps weren't' required by law to set aside a certain percentage as capital reserves, they didn't.

They just kept raking in the cash while unwary investors believed their investments were secured by these phony guarantees.

One investor has averred that the default on subprime mortgages (foreclosures) could have been absorbed, but coupled with the additional exposure of having to pay out monies (in the form of insurance) when these mortgages failed, it was too much exposure for these businesses to stay afloat.

Just another spurious attempt on the part of some to make minorities responsible for the financial woes of the nation, rather than the greedy, and wealthy corporate entities.

They fleeced the country, and are now deflecting the blame onto any group but themselves.

kid said...

They want to blame the WORLD'S financial problem on blacks.The people won't buy it this time.Everyone also kept selling short.I take it you have a degree in Finance, if you don't you should.