The consies have figured out who to blame for the meltdown of the financial industry: poor minorities!  Yes!  Nothing to do with the insane lending practices of rich white men in an unregulated shadow banking system; it’s all the fault of government forcing helpless bankers to sell houses to the darkies!

Daniel Gross has a must-read response to this nonsense:

http://www.slate.com/id/2201641/

The Community Reinvestment Act applies to depository banks. But many of the institutions that spurred the massive growth of the subprime market weren’t regulated banks. They were outfits such as Argent and American Home Mortgage, which were generally not regulated by the Federal Reserve or other entities that monitored compliance with CRA. These institutions worked hand in glove with Bear Stearns and Lehman Brothers, entities to which the CRA likewise didn’t apply. There’s much more. As Barry Ritholtz notes in this fine rant, the CRA didn’t force mortgage companies to offer loans for no money down, or to throw underwriting standards out the window, or to encourage mortgage brokers to aggressively seek out new markets. Nor did the CRA force the credit-rating agencies to slap high-grade ratings on packages of subprime debt.

The CRA is about as far from a possible culprit as you could find.  Its purpose was to prevent redlining: banks’ practice of accepting deposits from poor neighborhoods but not lending there, which is not only immoral but stupid.  As Gross notes, sensible lending to the poor is quite possible: e.g. Nehemiah Homes has built and sold homes to the poor in New York for 27 years, and run into 10 defaults on 3900 homes.  If Carl Icahn’s high-end construction firm WCI Communities had success rates like that, it might have avoided bankruptcy.

There should be zero tolerance by now for right-wing irresponsibility.  Laissez-faire does not laisser les bons temps rouler.  Just as power corrupts, lack of oversight leads to ruin.

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