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The Liberal Housing Crash

hypocritexposer

Well-known member
June 11, 2009
The Liberal Housing Crash
By Christopher Chantrill

The American people are pretty well convinced that the mortgage meltdown was the fault of greedy bankers, stupid borrowers, and the odd Friend of Angelo Mozilo like Sen. Christopher Dodd (D-CT). That's hardly surprising, since the mainstream media has shown a vivid disinterest in getting to the bottom of it all.

That's why we have Thomas Sowell. His latest book, The Housing Boom and Bust, is a workmanlike analysis of the housing crisis. It's short enough, at about 50,000 words, for anyone to get through on a weekend.

Needless to say, Dr. Sowell does not find that the meltdown was all the fault of greedy bankers -- or even foolish borrowers. He puts most of the blame on politicians and activists that insisted that the US had an "affordable housing" crisis when it didn't. The government agencies that implemented the will of the political sector -- the Federal Reserve System, Fannie and Freddie, and the US Department of Housing and Urban Development -- they were the guilty suspects with actual fingerprints on the victim.

When analyzing a political scandal, our liberal friends usually like to expose the "myths" that the stupid American people were in thrall to. Dr. Sowell does not descend to such oversimplification, but we will.

Myth #1: The Housing Boom was Nationwide. No it wasn't. It was concentrated in just a a few places. News reports and scholarly research have found that even during the boom affordable housing "has been the norm across most of the country, but with glaring exceptions[.]" Writes Dr. Sowell:

Almost invariably... these are places where severe local government restrictions on land use, and other impediments to building, have driven the cost of houses and of apartment rents to levels that take as much as half of the average family's income[.]

In cities like Dallas and Houston where there are few restrictions on land use, home prices have not skyrocketed; nor have they collapsed in the downturn. "In Dallas the home price decline was only 3 percent."

Myth #2: Greedy Bankers Foisted Sub-Prime Loans on the Poor. Oh no they didn't. It was government. You see, liberal politicians and activists were convinced that banks were unjustly denying loans to minorities and low-income borrowers. They even had studies to show that minorities were discriminated against. The solution? Force. Liberals would force the banks to loan money to less-qualified borrowers.

Various community activists across the country have been able to pressure banks into making concessions in money or in kind, in order to get those activists to withdraw their objections to pending mergers or to banks opening new branches in another state, for example.

Myth #3: Lack of Regulation Caused the Crisis. Actually the regulators were part of the problem. With the politicians cheering them on, the regulators were all over the banks forcing them to lower their lending standards. And when the regulators finally did try to restrain the banks, the politicians reined them in.

When the Office of Federal Housing Enterprise Oversight... turned up irregularities in Fannie Mae's accounting and in 2004 issued what Barron's magazine called "a blistering 211-page report," Republican Senator Kit Bond [R-MO] called for an investigation of the Office of Federal Housing Enterprise Oversight, tried to have their budget slashed, and sought to have the leadership of the regulatory agency removed. Democratic Barney Frank [D-MA] likewise declared: "It is clear that a leadership change at OFHEO is overdue."

These three myths are familiar. They are verses from the favorite refrains of the liberal songbook. You can also find them in the "whereas" sections of countless liberal Enabling Laws. Whereas there's a national crisis; Whereas business is to blame; Whereas government doesn't have enough regulations: Now therefore... more liberal administrative power is the answer.

Then the liberals act surprised when the Law of Unintended Consequences kicks in, and government ends up hurting the very people liberals want to help. The result of cranking up house prices in San Francisco is that "the black population has been cut in half since 1970." Who knew?

Whatever your grand vision, you cannot ultimately escape from the costs of your vision, writes Sowell.

One of the biggest differences between economic decisions in the market and political decisions in government is that costs are an inescapable factor in economic decisions, while political decisions can often ignore costs[.]

But not forever.

For some legitimate functions of government, like defense, excessive cost goes with the territory. When you are defending against Hitler, you crank up the National Debt to 150 percent of GDP and worry about paying it off later.

But cranking up the National Debt over 100 percent of GDP to clear up the mess after some liberals had a dream of "affordable housing" that they thought other people should pay for is something different. After paying for that, people might just decide they want to change their governing elite for another one.

Christopher Chantrill is a frequent contributor to American Thinker. See his roadtothemiddleclass.com and usgovernmentspending.com. His Road to the Middle Class is forthcoming.
 

Mike

Well-known member
Dr. Sowell is a very well respected scholar. His research & analysis will turn some heads for sure.

Why are the Libs in denial?

Because they put their pride above their country.........

Treasonous if you ask me.................. :mad: :mad:
 

hypocritexposer

Well-known member
We all know how liberals love ACORN, here's a good article about their part in the Housing crash. This is a portion from a pdf on ACORN

How did ACORN contribute to the current
fi nancial troubles?

The crisis didn’t fall far from the tree. First,
ACORN pushed for changes in the Community
Reinvestment Act (CRA), a law that
was meant to prevent racial discrimination in
bank lending, by creating legal weapons to
force banks to loosen their lending criteria.

ACORN got those changes in 1989, in the
wake of the savings and loan crisis.
The rule changes have opened banks up to
increased public scrutiny, allowing advocacy
groups like ACORN to monitor bank
operations. It also created an expanded
liberal interpretation of CRA that minimizes
creditworthiness as a factor in bank lending
decisions and argues that lower rates of lending
to the poor and minorities are ipso facto
evidence of discrimination.

Whenever banks have attempted mergers
or buyouts, ACORN has been there to protest
until the banks promise to lower their
lending standards to assist people with poor
credit who are statistically far less likely to
repay them. The results are now apparent.

ACORN faced one serious problem in its
campaign to get the banks to water down
their lending requirements. Fannie Mae and
Freddie Mac pushed back and refused to accept
so much questionable mortgage paper.
They said their mandate was to expand housing
ownership by extending credit to creditworthy
would-be homeowners. So ACORN
turned its powers of protest and persuasion
on Congress, on the Clinton administration,
and on Fannie and Freddie.

ACORN got its way. The Clinton administration’s
Department of Housing and
Urban Development decided to count subprime
loans as affordable housing credits.
Congress several times acted to loosen up
Fannie and Freddie’s loan requirements.
Congress ignored warnings by free market
critics, such as the Competitive Enterprise
Institute’s Fred Smith and the American
Enterprise Institute’s Peter Wallison, and
allowed Fannie and Freddie to balloon in
size with these new potentially bad loans
infl ating a growing housing bubble.

How well did that work?

National Review’s
Stanley Kurtz unearthed an ad in the Chicago
Sun-Times for 1995 that began “You’ve got
only a couple thousand bucks in the bank.
Your job pays you dog-food wages. Your
credit history has been bent, stapled, and
mutilated. You declared bankruptcy in 1989.

Don’t despair: You can still buy a house.”

Kurtz opined, “In retrospect…encouraging
customers like this to buy homes seems little
short of madness.” Stanley Liebowitz, an
economist at the University of Texas, wrote
that the current mortgage market debacle is
“a direct result of an intentional loosening of
underwriting standards -- done in the name
of ending discrimination, despite warnings
that it could lead to wide-scale defaults.”
Most of America’s current fi nancial troubles
were caused or made worse by the artifi cial
growth of the housing market, which followed
from the relaxation of standards.

So you could say that the problem was both
planted and watered by ACORN.

http://www.capitalresearch.org/pubs/pdf/v1225223330.pdf
 
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