Wednesday, October 8, 2008

CRA? Please. Give me a break

The newest story put forth by Conservatives is that the current financial meltdown can be blamed on some do gooder, socialism minded liberals and minorities.

The abridged story told by the Conservative spin machine is that a program called the Community Reinvestment Act passed in the seventies and beefed up by Bill Clinton FORCED banks to give minorities bad loans, which led to this current crisis. So, it is all the fault of community organizers (hey, wasn't that Barack Obama guy a community organizer?), Liberal Democrats and minorities.

I am going to post a few articles from various sources below which debunk this story quite nicely. The problem is that those who are disposed to believe this will not believe the stories because they come from the LIBERAL spin machine - the mainstream media.

Of course, if you look hard enough you can find articles to justify that the CRA was to blame (go to any conservative talk radio person's blog or web site and I'll bet you'll find it). The above is just a random sampling of several articles supporting the idea of this fallacy. I could probably post 15 or 20 that I've found.

Most of the bad loans given were given by institutions NOT covered by the dictates of the CRA.

They gave those loans out not because of any altruism that they wanted to see the joy of someone owning a home, or fear of government regulation. They gave those loans out because they made a lot of money doing so.

There has been a lot of talk about the loan givers. Not much talk about the loan takers. At the risk so sounding cold and politically incorrect, some of those people had no business owning the homes they were put into. Some of them could not afford the homes, but the desire for instant gratification, and the American desire for consumption made the loan an easy take. The loan guy probably said, well, one more loan won't hurt the system (IF he had the scruples to think that way), and the loanee, in most cases said, well, I MIGHT get a better job before the big numbers come due, or I MIGHT get a raise.

What we got in the end was disaster.

There are several reasons this story (the CRA = Housing Crash/Credit Crunch story) needs to be pedaled now. One is to try to take down Barack Obama's campaign a few notches. The most important reason though is to blame a powerless group to divert attention from the big companies who gave out these reckless loans and the other ones that ran their companies into the dirt through risky and reckless accounting practices. Also to divert attention from a system in Washington which turned a blind eye while all this was going on.

It is also to deflect attention from their child like mantra that if you only take the hands off the market, the market will do the right thing, and will eventually correct itself. This works great, right up to the moment the government has to step in and pump massive infusions of cash in to save whatever capitalist venture that has gone wrong.

If they admitted to these things, they would have to admit that their premises about capitalism and economics were mostly incorrect.

Never mind all of this stuff above.

Does it really sound plausible that handing out a few bags of shekels to some minorities could be the cause of the WHOLE WORLD ECONOMIC SYSTEM to crash in a violent and cataclysmic manner? I don't even know how they can say it with a straight face.

And if that small event could cause the whole system to crash, what does that say about the robustness of the system? The resiliency of the system?

Not much in my opinion.

There is something fundamentally wrong with the system. In the weeks, months and years to come, we MIGHT find out what it is, or we might not.

It is acknowledged now that a lot of folks thought they understood the system, but that it has become so fast acting and complex that they do not understand it at all.

In the mean time, the need exists for those who can look at the WHOLE economy. Not just the bits and pieces that strike the media fancy that day (i.e. the stock market one day, unemployment the next).

Going to be some interesting, painful, scary times.

1 comment:

Vince Patton said...

Good follow up references! You should send this to - someone was making a similar argument on this topic a day or so ago.