Tuesday, July 22, 2008

Hey, that's what I said

In an IBD editorial this morn, Thomas Sowell agrees with my March '08 blog post: a leading cause of the subprime mortgage fiasco was the Community Reinvestment Act which pressured lenders to make loans they never would have made otherwise.

A short blurb:
It was not that many years ago when there was moral outrage ringing throughout the media because lenders were reluctant to lend in certain neighborhoods and because banks did not approve mortgage loan applications from blacks as often as they approved mortgage loan applications from whites.

All this was an opening salvo in a campaign to get Congress to pass laws forcing lenders to lend to people they would not otherwise lend to and in places where they would not otherwise put their money.


  1. Welcome to the Club, Will - there are some respected and interesting blogs within...and referencing Thomas Sowell is always an appropriate action.

  2. Thanks, neighbor. This should add to the fun.

  3. There are many factors, I'll call them "10% factors" in this whole disaster. The CRA is one, you are correct.

    However, the overarching issue in this debate is that these banks' INVESTORS (not the banks themselves) pushed the banks in this direction. It was just another ploy to make money. I'll call that a "50% factor." And don't forget the buyers....greediness...when we bought our first house in 2004, we were told that we qualified for more than 300% more than our house cost. So what? We knew, that given 5% raises per year, we could not afford a $550,000 house.

    We live on the City/County line, and I travel for work. Most of the foreclosures I see are not in the City - they're in Monkton, Catoctin, Belair...all the folks who make $120K per household and purchased $700K houses with no money down. That is greed. What were those people thinking?

    I particularly loved the one "case file" from Connecticut that the Democrats were showcasing - a woman was unemployed and house shopping (...WHAT?!!!...) and the lender put her down as an employee of his compan(...WHAT?!!!) ...which she agreed to (WTF!)......and then defaulted only 8 months later....on a $600,00 house....the Dems wanted everybody to feel sorry for the "victimized" buyer. Now I agree, what the lender did was illegal and unethical, and he should be punished. But give me a break - was she retarded?

    So again....buyer greed is not an insignificant part of this mess.

    Yes - to answer your next question - I am jealous. From about 2001 to 2007, we had to watch people with our same income living these luxurious lifestyles due to jumbo & interest only loans. Coworkers would say to me, "Bro, you totally need to get yourself a land rover. Get rid of that old Tacoma!"

    Ha ha, enjoy living back at your mom's house!