A flashback from Barry Ritholtz offers fine research and reporting from a traditional publisher of American journalism.
Probably need bulletproof one-way glass to view this lineup
❝As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio…
Commentators say that’s what triggered the stock market meltdown and the freeze on credit. They’ve specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie’s and Freddie’s financial problems.
❝Federal housing data reveal that the charges aren’t true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.
❝Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height from 2004 to 2006.
❝More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that’s being lambasted by conservative critics…
❝Fannie, the Federal National Mortgage Association, and Freddie, the Federal Home Loan Mortgage Corp., don’t lend money, to minorities or anyone else, however. They purchase loans from the private lenders who actually underwrite the loans.
It’s a process called securitization, and by passing on the loans, banks have more capital on hand so they can lend even more…
❝Private non-bank lenders enjoyed a regulatory gap, allowing them to be regulated by 50 different state banking supervisors instead of the federal government. And mortgage brokers, who also weren’t subject to federal regulation or the CRA, originated most of the subprime loans.
Though this piece from Goldstein and Hall is over seven years old, the facts, data, the truth of the analysis hasn’t changed. Conservative politicians enabled private capital to ramble through giant unregulated loopholes in the sacred name of profit.
Banks and legitimate mortgage loan firms overwhelmingly continued to live up to responsible practices. Sleazy operations – often working through storefront phonies – did just about whatever they pleased. Lied, cheating, stealing from clients and taxpayers alike.
Unless your state legislature repaired what a corrupt conservative Congress invented, those storefront mortgage lenders are still out there, still cheating, still making irresponsible profits. That’s the case here in New Mexico. It’s likely to be the same where you live, too.
Thanks, Barry Ritholtz