Much to the shock and contempt of Keith Ellison, the culprit responsible for today’s financial crisis has been discovered by those on the right end of the political spectrum.
“Poor blacks caused this,” said Ellison, Minnesota’s the 5th District congressman, scornfully. “That’s what we’re supposed to believe. Little ACORN caused this. The mighty captains of Wall Street got taken down by little ACORN and poor black people. That’s what you’re hearing on the right. The gall and audacity of this is beyond imagination.”
In fact, many, including 6th District Rep. Michele Bachmann, seem to be saying that the demise of Wall Street can be traced to the Community Reinvestment Act (CRA) of 1977.
That’s right. In the eyes of some, today’s problems aren’t a product of greed, or lack of regulation, but instead can be traced to the Jimmy Carter era. That’s when Congress passed CRA, an act that encouraged commercial banks to invest in housing in cities that were facing both redlining and major decline. The idea was simple: Stabilizing neighborhoods, through home ownership, would stabilize cities.
The act had the support of a nonprofit organization, the Association of Community Organizations for Reform Now (ACORN). It survived two terms of Ronald Reagan, the Gingrich era and three terms of Bushes before apparently creating today’s crisis.
But now, a handful of economists and a lot of conservatives who are looking for a scapegoat claim that it was the CRA that encouraged risky lending that led to the defaults that have led to the mess we’re in.
In one of her recent interviews with CNN’s Larry King, Bachmann seemed to be referring to the CRA when she said this:
“If you look at the housing crisis, government has to take its share of the blame. After all, government was goading these mortgage lenders, saying you’re redlining. You’re being discriminatory. If you don’t give loans out to marginally credit-worthy people, we’re going to come after you. The Democrat-controlled Congress wants to have these mortgage lenders make loans to people with marginal credit.
“Well, guess what? If you aren’t making money lending, this is not a shock when you have loans that aren’t paid back. And now the American people have to come in and step in and pay for these bad loans.”
Bachmann is not alone in seeming to point fingers at the poorest for the collapse of the richest. Investors’ Business Daily and The Wall Street Journal also have opined that the CRA is a major player in the collapse. Conservative bloggers and radio talk show hosts are happily pointing out that Jimmy Carter and, of course, Bill Clinton are the problem.
But most economists seem to agree that, at most, 20 percent of the bad loans that have led to the collapse can be traced to CRA.
Time magazine pointed out in a recent article that CRA-regulated institutions — meaning commercial banks — weren’t the big players in the run-up of bad loans. The subprime mortgage binge, Time reported, came from 2003 to 2006 and was brought about by unregulated mortgage brokers financed by now-busted, unregulated Wall Street investment banks.
Says Ellison: “To suggest that the greatest financial crisis we have faced since the Great Depression was caused by legislation that was created to help prevent low-income individuals from assuming high-cost, subprime loans that have caused the crisis today is absurd. To suggest that struggling families trying to keep their home brought down the Titans of Commerce, the Masters of the Universe on Wall Street, is ludicrous. To suggest someone who is raising three children while holding down two minimum wage jobs on a high school education was able to stall one of the greatest economic engines on Earth needs their head examined.”
How does he really feel?
“I’m really steamed,” said Ellison.