Both Sides Of The Financial Crisis

by Lawrence Henry - October 3rd, 2008 - American Spectator

Of late, at least in conservative quarters, reports have made clear how much of the current financial crisis may be laid at the feet of Democrats and their social engineering policies.

Jeff Jacoby, the lone conservative columnist at the Boston Globe, wrote Sunday, "Barney Frank's talking points notwithstanding, mortgage lenders didn't wake up one fine day deciding to junk long-held standards of creditworthiness in order to make ill-advised loans to unqualified borrowers. It would be closer to the truth to say they woke up to find the government twisting their arms and demanding that they do so -- or else."

The problem of course is that most of America still gets its news from the blatantly biased Main Stream Media (MSM). For that reason and that reason alone, most people are not aware of how ridiculous is the accusation that this problem was caused by "Wall Street". The use of that term is specifically intended to avoid talking about how the Democrats criminalized looking at the credit worthiness of minorities who applied for loans.

It is what has allowed them to insist that the big nemesis "Wall Street" is to blame. The don't want the issue to become the home mortgage industry because their focus on government socialism of the home mortgage industry would be easy to prove. Therefore they never allow that to become the issue. They broaden their accusation to a much broader target, "Wall Street" and reject the argument that anything they did encouraged "Wall Street" to be greedy. This is a classic mis-direction ploy.

It also distracts anyone from talking about the ridiculously dumb accounting rule changes that has allowed the collapse of home prices to sabotage the ability of banks to loan money. The banks asset base and profitability has been destroyed by "paper losses" based on an accounting gimmick to punish Enron. Unfortunately Enron is not harmed since they have long since gone under. This is a classic example of the unintended consequences of laws.

Another article making the case directly is "Clinton Democrats are to blame for the credit crunch" by Dennis Sewell. Talking about the need to force banks to increase loans the Clinton administration started suing banks to get compliance

However, when little or no overt or deliberate racial discrimination was discovered among the mortgage lenders, HUD’s investigators turned to trying to prove ‘disparate treatment’ of minority groups, a notion similar to that of unintentional ‘institutional racism’. If a bank refused loans to proportionally more black applicants than white ones, for instance, the onus would fall on it to prove it had good grounds for doing so or face settlement penalties running into millions of dollars. A series of highly publicised cases were brought on this basis, starting in 1994. Eventually the investigators would turn somewhat desperately to ‘disparate impact’, a form of discrimination so abstract and rarefied as to be imperceptible to its supposed victims, and indeed often only discernible at all through the application of multivariate regression analysis to information stored on regulators’ databases. In fact, by 1995 Achtenberg was actually having to rein in her zealots, issuing a clarification that the use of the phrase ‘master bedroom’ in a property advertisement was, despite its clear patriarchal and slave-owning resonances, not actually an actionable offence under the anti-discrimination laws.

Small businesses cannot get loans to operate because government goons threatened bankers with jail if they did not loan enough (according to several Democrats enough was 50%) home mortgages to the 12% of Americans who were black.

To avoid this becoming an issue that harms them politically, Democrats have been waging a war against the nebulous and ill defined "Wall Street". So far it has been successful. As noted in the above article, only a few conservative web sites have really dealt with the blame that should be attached to Democrats instead.

The one thing that I want to point out (again), separate from who is to blame, is the stupidity of the current bail out proposal. Nothing in the bailout fixes the blackmail of the banks to issue bad loans, nor does it end the mark-to-market accounting rules that turn the consequences into a mortage industry crisis. As I have said before, how long do you think it will take before we are right back in this mess. You must be filled with despair when you recognize, the problems have not been fixed, they have simply been kicked down the road . . . at a huge cost to the American taxpayer.