Racially motivated

Breitbart reported Rep. Barney Frank said Monday that Republican criticism of Democrats over the nation's housing crisis is a veiled attack on the poor that's racially motivated.

Why is that? Were the bad loans just to people of one race? And even if they were, do all people of that race take out loans they can't pay back?

The Massachusetts Democrat, chairman of the House Financial Services Committee, said the GOP is appealing to its base by blaming the country's mortgage foreclosure problem on efforts to expand affordable housing through the Community Reinvestment Act.

The CRA may be the start of the problem, but it really started with legislation and regulations from the Clinton administration pressing the banks to write sub-prime loans, which Fannie and Freddie would buy regardless of the probability they would be paid back. And then when Bush pressed for changes beginning in 2001, and many times beginning in 2003, and 17 times in 2008 alone, and McCain did beginning in 2005, the Democrats blocked any efforts to fix the problem.

Ed Morrissey blogged The real cause of the collapse was the Congressional push for Fannie and Freddie to support subprime lending by purchasing the paper from lenders, which is related to the same policies that generated the CRA but isn’t the CRA itself. Lenders make money one of two ways: keeping the paper themselves and getting the interest over the term of the loan, or selling the paper to someone else for a guaranteed short-term profit. When Fannie and Freddie began buying all of this paper, they created a huge demand for subprime loans — and lenders responded by offering easy money to almost anyone who applied. They threw out income requirements and equity thresholds (such as down payments) and generated tremendous short-term profits for themselves … while Fannie and Freddie assumed all the long-term risk.

Had the risk remained at Fannie and Freddie, the problem would never have gone beyond their collapse. Unfortunately, Congress also pushed the GSEs to securitize the debt in order to spread the risk. Investors considered those mortgage-backed securities a safe bet, backed by the US government. That’s the direct cause of the financial collapse, along with the collapse of housing prices that resulted from the sudden deflation of demand.

Congress — and specifically Frank himself — had plenty of warning that this would happen. The anger generated from that information has nothing to do with racism, and everything to do with the breach of trust between Congress and its constituents. Frank, Chris Dodd, and others like Lacy Clay and Maxine Waters tried the racist meme out on regulators who tried to warn Congress of the pending collapse. They have to smear their critics. They certainly can’t admit that Congress failed spectacularly. Racism is the last refuge of scoundrels in 2008, and not surprisingly, we find most of those scoundrels in the Democratic Party.