Two Ways to Constrain the Casino Economy

Elizabeth,

Nobody that I'm aware of blames the poor for the Community Reinvestment Act. We conservatives blame Congress, whose members are quite well-off, for passing the law.

Just thought I'd clarify that. Unless you have a specific example to point to, please do not repeat this canard.

LV

Nobody that I'm aware of blames the poor for the Community Reinvestment Act.

In fact, I also have heard just that -- just wish I could remember from whom.

"When any new kind of investment is invented - and Wall Street has come up with some doozies in recent years - the burden should be on the inventor to demonstrate why it shouldn't be regulated."

What is and is not regulated is up to Congress and the agencies it has established, who are free to consult with or ignore the developers of new financial products. Those developers should be left alone to determine what regulations, if any, they would prefer, and what legal and lobbying strategies they should pursue.

LV

Well if you ever do remember be sure and let us know.

LV

Actually, the pie can be enlarged through innovation; that's why we have a society where the vast majority of people in this country have adequate food, clothing, and shelter, something that hasn't always been true throughout human history. What we've fooled ourselves into thinking is that government can enlarge the pie simply by fiat. It doesn't work that way.

LV

That was beside the point because, in fact, people simply wanted more of the pie at the expense of everyone else and blamed the government when it wouldn't allow them to get it legally -- it essentially became a form of class warfare that favored the rich at the expense of the poor. Anyway, you have to get your resources from somewhere; a focus on the "casino economy" tried to sidestep that reality -- same as in the 1920s.

It's not besides the point; Lord V. was responding directly to a point you were trying to make.

But your other point was a good one. We need a cultural change in this country. Too many people have an attitude of entitlement, whether it's the belief of someone that he should be able to get rich quick from trading a few securities or screwing a few people over or the belief of someone else that he deserves a bigger house or fancy vacation because he sees someone else enjoying those things.

You are right in saying that people have an attitude of entitlement; however, these days it's really the rich who drive it (and who else could?). That's why I question the relevance of such people complaining about government -- which, in essence, means the inability to do just whatever they wanted without answering to anyone.

Whether anyone is actually saying it directly or out loud is perhaps open to debate. But editorial writers are commenting on it, so the idea must be circulating and had to come from somewhere.

Here are a few links:
Newsweek

Boston Globe

Washington Post

Slate

Democrats act on behalf of ACORN trying to put the screws on banks to make loans to poor households so that the poor vote and keep the Dems in power. These equations get made everyday all over the place. And the critique is not disconnected from poor persons, who in the storyline, are treated as disempowered dependents of the State intent on begging instead of productive labor.

Around 1990 I was part of an "ACORN style" group. HUD was looking at a big stock of aging and dysfunctional urban housing projects. Banks had lousy track records of pulling cash out of poor communities and putting none back in. Feds were interested in new ways to deal with public housing and with getting persons into home ownership. We targeted a smaller regional bank to implement new packages of loans and commuity-based counseling to get persons into homes. They relented and worked out a program that served the needs of all. This helped them meet CRA and pressured the largest banks to follow suit.

But these waves were followed by the predators.

It would be wonderful to have an honest and open exploration of the CRA. It's successes and failures. Including how a good policy can set in motion a predatory cycle.

There is real economic opportunity in poor communities. The problem is not a lack of cash. There is real opportunity for poor persons and real opportunity for existing entrepreneurs. There is opportunity for just businesses and for vultures. The absence of Government controls and the intervention by government with controls and resources all create different opportunities for different predators.

The existence of predators and what they do is not an inherent critique of any intervention or non-intervention. Any course of action or non-action by government must take into account unintended consequences and how the enemies of a just society will attempt to exploit the situation.

When government acts directly as the predator--that is a different story. When the Fannies were snatching up all the subprimes from the predators we had government in lock-step with the predators. I suspect the same is true with the relationship of the New York Fed to Wall Street.

America's pie got bigger because of government confiscation and reappropriation of land with it's contingent resources, massive government investments in infrastructure, exploitation of immigrant labor, government protection of intellectual property through the patent and copyright offices and, more recently, tax codes which incentivized certain behaviors and corporate welfare in the form of tax breaks and subsidies to the "working poor".

rush limbaugh on the radio

what quote, made when

primary and secondary sources for Rush's criticism of the Community Reinvestment Act... for what it's worth, i think it is unwise to make loans to people who cannot afford them... don't know what the answer is in terms of empowering them to afford such loans

http://www.rushlimbaugh.com/home/daily/site_092...

http://www.youtube.com/watch?v=qpJP9e_FuEs

http://www.dailymarkets.com/economy/2008/10/12/...

http://www.propeller.com/story/2008/09/29/racis...

Mortgage industry is predicated on idea that virtually all persons cannot afford their home. The basic 30-yr-mortgage is essentially an "interest-only" product.

Essentially, the housing stock is owned by banks, etc; through which they lay claim to 25%-40% of all our income. By agressive lending, they can manufacture an increase in housing values, making the borrowers think they are actually building some equity before they sell and take on another 30-year mortgage. They don't want you to afford the house--just enough to pay them enough so they can make a profit on their money.

thanks for the insights

You're confused. The question isn't Rush has criticized CRA. The question is whether he has blamed poor people for the CRA.

I don't think most of these people are reading what you actually wrote. It's as if their brains on are autopilot. It's like they can't read the phrase "the poor".

Please, go back and read what Lord V. was saying. He didn't say "no one is criticizing the CRA".

Confused? Me? Confused? Wouldn't be the first time.

Okay

LV

To be precise, Ms Palmberg asserted that conservative pundits were "brazenly trying to blame the poor for the mortgage meltdown by targeting the Community Reinvestment Act." She did not assert pundits were brazenly blaming the poor directly; but that the focus on the CRA was a veiled 'blaming of the poor.'

Your assertion that the focus of the critique is on Congress and the CRA is consistent with what she wrote. You both agree the critique is focused on Congress' CRA.

You disagree in that she sees pundits framing the CRA so as to associate with poor persons. Therefore, if the financial meltdown was caused by the CRA--it has a close connection to poor persons.

So do pundits make this between the CRA and poor persons?

The few quotes I gave you connected the following persons to the CRA:

1. welfare recipients
2. bad-credit customers with "dog-food" wages
3. (those on) welfare rolls ... hasten(ing) the collapse of American capitalism
4. people with poor job histories
5. people with marginal credit
6. people with inadequate incomes
7. these people are largely minorities
8. minority borrowers who do not meet the normal criteria

And just for clarity sake, are you saying, as you hear the conservative punditry class, that you do not hear the following argument being made???

Democrats are kept in power by a web of special interests whose votes they have purchased with social programs that make these seem constituents forever dependent on government. ACORN is a perfect example of duplicitous and predatory and corrupt behavior that connects the votes of poor people for Democratic candidates to obtaining special benefit from government for poor people. And there is no better example of this corruption than poor people organized through ACORN putting the screws to banks and public officials to use the CRA to illegitimately put bad loans into poor communities.

Letjusticerolldown,

It is astonishing to see the lengths that people will go to turn a criticism of a poorly designed law and regulations into "brazenly blaming the poor".

Congress passed CRA. Congress itself is composed primarily of wealthy individuals.

Regulators then issued rules based on CRA. Since these regulators are mainly professionals -- lawyers, economists, etc., there were very few poor people involved in this process as well.

To the extent that poor people were involved, it was largely on the periphery. I hate to burst your bubble about this, but the vast majority of Congressional districts are not competitive. And poor people do not lobby much. Oh, some interest group may have a poor individual give testimony or do news interviews, but that poor individual was almost certainly chosen for his or her adherence to the philosophy of the lobbying group, and coached in advance on precisely what to say.

The bottom line is that politics is overwhelmingly a game for the middle-class and up, and that goes for both parties. In a society where most of the population is in the lower middle class or better, there's no getting around that.

(On the whole that's a good problem to have -- the only way that the poor will ever drive politics is through numbers, and if the majority of your population is poor, by definition you have a poor society.)

As far as just what went wrong with CRA, because of inadequate or non-existent means tests, CRA was indirectly responsible for ill-considered loans to middle-class borrowers who used the funds to "flip" houses, in essence engaging in real-estate speculation. As I understand it, the CRA's effects on real estate speculation, and the inevitable real estate "bubble", did more damage than loans to poor families.

So even if you want to go beyond Congress and the regulatory agencies, the blame falls mostly on people who are middle-class or better. And I think if you read what most conservatives are writing, you'll see they are aware of the distinction.

Right now the left, which by-and-large supported CRA, is trying to equate criticism of CRA with blaming the poor. At this point, they aren't helping the poor in this as much as they are using the poor as a shield to cut off examination of their handiwork. We just can't let them get away with that.

LV

According to the FDIC and the Federal Reserve there is no empirical evidence that the CRA contributed to the 2008 financial crash. Also San Francisco Federal Reserve Bank Governor Randall Kroszner has stated that no empirical evidence had been presented to support the claim that "the law pushed banking institutions to undertake high-risk mortgage lending". In a Bank for International Settlements ("BIS") working paper, economist Luci Ellis concluded that "there is no evidence that the Community Reinvestment Act was responsible for encouraging the subprime lending boom and subsequent housing bust," relying partly on evidence that the housing bust has been a largely exurban event. Others have also concluded that the CRA did not contribute to the current financial crisis, for example, FDIC Chairman Sheila Bair, Comptroller of the Currency John C. Dugan, Tim Westrich of the Center for American Progress, Robert Gordon of the American Prospect, Daniel Gross of Slate, and Aaron Pressman from BusinessWeek.

Not exactly a group of flaming radicals. My sense is that conservative pundits have have evaded the obvious Bush /republican party / Greenspan responsibility for the crash blaming it on greedy housing bubble queens as Dems have evaded the Rubin/ Clinton connection blaming it on greedy republicans. What is sure is that greed, and not a pursuit of greater justice or equity for the poor has bankrupted the banks. The recommendations for reform in this article are modest and reasonable and in my view understate the need for reform.

Also, Voldemort and E77 don't answer Pastor Jeff's explanation of pie growth. Which seems to me more of an explanation of who ate the pie and why.
I personally have never seen a pie grow. Pies in my experience diminish according to quality and appetite. Right now it is bye bye miss, Mrs and Mr American Pie, Drove my Chevy and Ford and Chrysler to the levy and the levy was dry. Them good old war profiteers were drinking blood and getting high an now its time for everyone to cry.

Where was conservative outrage while the bankers and war profiteers looted the country and the neocons murdered hundreds of thousands and initiated nation wide unwarranted spying? Instead they reserve their outrage for attempts to improve education, health and opportunity for those hurting the most. On this blog they argue for Ron Paul's ideas and vote for Bush, Cheney McCain etc.