[ExI] Sudden outbreak of democracy baffles US pundits

[Damien Broderick]

At 03:35 PM 10/4/2008 -0700, Spike wrote:

>I suspect this bailout solution will solve nothing, for it leaves in place
>the root cause: government requirements on banks to give out what they
>already know are bad loans.  I find plenty of good explanations in the
>internet commentary, but almost nothing in the mainstream press.

Really? Is that like "The Devil made Enron do it"? I read the 
following from various people on one site opened at random:

=======================

The government forced these banks to offer bad loans

.       That's what Hannity says. The government was holding a gun to 
the heads of the banks, forcing them to offer loans to people who 
could not afford them. Such clarity is refreshing.

.       If Sean said it, it must be true.

.       He was talking about Barny Frank's insisting that Banks make 
loans more available to minorities. It was "everyone should be able 
to buy a home" mentality. Whether they could afford it or not.

.       The banks were not forced to make loans to people who could 
not afford them. The banks were required to make a certain amount of 
loans to people who were normally denied loans for various reasons -- 
but they were not required to talk these people into buying a house 
worth three times what they could afford, nor were they required to 
put false information onto loan applications to make the applicant 
appear more solvent than they were, nor were they required to bundle 
the mortgages and trade them like stocks. In short, nobody passed a 
law that lenders had to be greedy b at st@rds.

.       On top of that, no one can force big business to 'make these 
loans' in such large numbers...big business did it for one 
reason...GREED. They were hungry for something after the 'dot com' 
crash, and so thought that they could make a killing on real estate, 
and so in pursuit of huge sums of money, they gave loans to anyone 
and everyone.

.       Oh and they must have forced wall street to issue all of 
those crazy derivatives.

.       Okay, the CRA loans were at most 25% of the subprime loans, 
and they have been among the best performing loans--they've only 
defaulted at about the same rate as non-subprime loans.

Hannity is an a$$. And a misleading one.

.       Too bad your only exposure to this was this particular 
source. It's not exactly news that there was pressure to make housing 
affordable to people who normally can't afford it, and while this 
didn't cause the bubble, but it played a fundamental role in the 
explosion of bad paper.

"in 1992, Congress passed the Government Sponsored Enterprises bill, 
which set "targets" (i.e., quotas) for Fannie Mae and Freddie Mac, 
which are quasi-governmental publicly-traded for-profit 
thing-a-ma-bobs, to encourage "affordable" and "underserved" (more or 
less minority) home loans."

A good idea in theory, to extend the dream of home ownership to more 
Americans, and particularly, more minorities, lower-income Americans, 
but banks aren't well-suited to applying progressive social programs. 
How creditworthiness is defined was altered to meet egalitarian ideals.

It's an unpopular issue to confront, because it reveals uncomfortable 
things about racial and social inequities.

This is also a conservative source, but it's more credible and 
statistically referenced than Sean's simplistic view.

.       Wow, that article blames Blacks, Hispanics, diversity 
initiatives, quotas, the Sixties cultural revolution -- so many of 
the favorite neocon bugaboos. I bet it is killing the author that he 
couldn't figure out how to blame homosexuals, too.

.       the CRA "strongly urged" banks to offer what were called 'no 
doc' loans. (No proof of income, no down payment, no qualifying). 
I've talked to my local banker and he said he would not approve 'no 
doc' loans. The unscrupulous lenders went for it like dogs to a bone. 
The more loans they could write, the money they could make selling 
them to the investment banks. The investment banks don't vet the 
loans, and good loans got mixed in and bundled with bad loans when 
sold to the investment banks.

I don't know about where you live, but here in Florida many low and 
middle income rental units were turned into condos leaving the people 
who couldn't afford to buy with limited housing opportunities. Then 
the "flipping" market crashed leaving the condo speculators (formerly 
landlords) with units they couldn't sell in the flooded condo market 
and renters without affordable housing. Greed, greed, greed all based 
on the idea that low income people should be able to buy a home (CRA 
social engineering).

[and on and on... blah blah]

================

Damien Broderick