Pedestrian Observer GB: Black & Minorities the Usual Scapegoats in Sub-Prime Debacle

Clearly what the spin masters are doing is to add insult to injury that serves as a façade or smoke screen to cover up the greed and predatory lending practices of lenders and “naïve” wall street trading Mortgage-Backed Securities. The historical financial crisis that we are facing is just like a nightmare that haunts us. The difference is unlike a nightmare wherein you awoke disturbed you are relieved that it was just a bad dream. In contrast the financial crisis is so very real like a never ending nightmare and the fear is very real with nothing to hold onto in seeing a resolution. You fear the outcome and the future that is in store for us and our children and yet instead of resolving the crisis we see finger pointing that are baseless and ignorant at best while those corporate criminals responsible for the debacle appears to be rewarded instead of holding them responsible and accountable.

Typical disgusting finger pointing blames everyone else except the culprits are pointed at the black & minorities as the usual scapegoats in the sub-prime debacle that brought us to where we are. Leading the pack is Rep. Michele Bachmann to quote:

Rep. Michele Bachmann slammed CRA in an appearance on Larry King Live on Monday night. “Look at the housing crisis. Government has to take its share of the blame,” she said. “After all, the 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.’ In fact, Chairman Barney Frank has made comments like that as well.”

She continued, “The Democrat [sic] controlled Congress wants to have these mortgage lenders make loans to people with marginal credit. Well, guess what? If you aren’t making lending… it is not a shock when you have loans that aren’t paid back.”

Alexis Garrett Stodghill, of BlackVoices is not surprised which I quote:

Neil Cavuto of Fox News has gone on record as saying "Loaning to minorities and risky folks is a disaster," during discussions of what precipitated our economy's meltdown. And he is hardly the only one singing in this chorus of blame.

In essence, many seemingly intelligent leaders are suggesting that it is not the heads of financial firms who are to blame for the sudden economic crisis. People skilled in financial knowledge and forecasting, who sought new mortgage volume at all costs so that they could bundle these loans to create massive profits for themselves by selling them as securities. No, no, no. Their motives were correct and pure. They are the victims!

It is the stupid "minority" credit-seekers who strong-armed these entities into giving them money that they knew in their hearts they could not and would not pay back. It was their ignorance of the terms of their loans. Not perhaps the creation of overly complex mechanisms for lending, that were then intentionally not explained to trusting consumers who believed in the sales techniques of mortgage brokerage firms, which were preached like gospel. These "risky" customers knew that the entire financial system was resting on their shoulders, didn't they? How could they be so irresponsible?

Of course you will hear something from someone like Cavuto this kind of a spin just as Anna of HillBlogger pointed out in her entry “FOX NEWS spin of spins!” where she embedded the youtube making you wonder if the Fox news reporter was blind or simply don’t know how to count.

So much for the spin and using blacks and minorities as their scapegoats this NY Times article Subprime Loans’ Wide Reach by Bob Tedeschi shows otherwise which I quote:

WHILE subprime loans deeply penetrated low-income and minority groups, a new study suggests that more upper-income borrowers and more whites took out such loans than any other groups.

Compliance Technologies, a lending-industry consultancy, last month analyzed more than 1.9 million subprime loans originated in 2006, the height of the subprime lending frenzy, and found that roughly 56 percent went to non-Hispanic whites. Affluent borrowers, those with annual income at least 120 percent of their given area’s median income, meanwhile, took out more than 39 percent of the loans.

“I was surprised to see that non-Hispanic whites received more subprime loans than all minority groups combined,” said Maurice Jourdain-Earl, a founder and managing director of Compliance Technologies.

Still, African-Americans and Hispanics received subprime loans in a greater proportion than whites. Whites made up 71 percent of the borrower population in 2006 and received 56 percent of the subprime loans originated that year. Blacks, meanwhile, made up 10 percent of the loan pool, yet received 19 percent of the subprime loans. Hispanics constituted 14 percent of the borrower community and received 20 percent of the subprime loans.

The reasons behind the disparities have been hotly debated. Some lenders have argued that minority populations were merely less creditworthy than whites, while some minority advocates claim lenders and brokers discriminated on the basis of race. Mr. Jourdain-Earl, whose company is minority owned, did not speculate on the cause.

Researchers in the lending industry have not tracked how well members of different demographic groups have kept pace with subprime loans made in 2006. Lenders keep such data, but they have not shared it publicly.

I am not so sure if lenders are actually keeping tract on the demographics and unwilling to release the data. For one it is discouraged if not illegal to classify borrowers according to their race. One thing for sure though was that it is extremely difficult to service low income families due to the stringent requirements that is surely a hurdle in itself. On that account to come up with an assumption that blacks and minorities cause the sub-prime melt down is probably more anecdotal than factual.

In The Minnesota Independent article “Against all reason, Bachmann and others blame 1977 fair-lending law for adding to economic crisis” by Andy Birkley should shed some light on this nasty spin:

Janet L. Yellen, president and CEO of the Federal Reserve Bank of San Francisco, told Congress in April:
There has been a tendency to conflate the current problems in the subprime market with CRA-motivated lending, or with lending to low-income families in general. I believe it is very important to make a distinction between the two. Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans, and studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households. We should not view the current foreclosure trends as justification to abandon the goal of expanding access to credit among low-income households, since access to credit, and the subsequent ability to buy a home, remains one of the most important mechanisms we have to help low-income families build wealth over the long term.
Interestingly, in 2005, just as the the explosion in subprime loans hit underserved neighborhoods, the Bush administration under pressure from banks changed the rules so that only banks with $1 billion in assets would be subject to CRA. The law was essentially gutted.

Robert Gordon of the American Prospect has traced the roots of the “blame CRA” meme back to Ron Paul supporters and crackpot conservative message boards, then to the conservative Washington Times and finally to Bachmann and other prominent conservatives. Talking Points Memo put together this video of conservatives blaming minorities for the housing collapse.

This is so pathetic, as if the hardship and difficulty of the blacks and minorities are enduring is not enough in the pursuit of the elusive American Dream they have the audacity to add insult to injury. The truth of the matter is that the rapid appreciation of home prices limited the ability of low income families to own their own home and as such to blame CRA as the culprit and the blacks and minorities that bankrupt the financing institution only shows ugly racist mentality. I guess it is easier to blame others than admit yes we were incompetent and allowed greedy criminal corporate entities to exploit and game the system to amass huge profits.

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