“But the CRA forced them to break the law!”

Thursday, July 21st, 2011 @ 10:08 am | Economy, Housing Bubble

The CRA-caused-the-crash myth had all of the right elements to make it popular amongst the brethren. Supposedly, librul Democrats passed the Community Reinvestment Act to force banks against their will to underwrite risky loans to families in urban areas. When those loans predictably underperformed, the hapless mortgage lenders were put out of business thereby paving the way for a government takeover of the private sector. The message of the story is obvious; business-hating politicians pulled the levers of Big Government and used listless Negroes as pawns in their long term goal of steering the USA further down the road towards Communism. There’s a couple things wrong with that story. Mortgage lenders lobbied hard for that legislation (under the twin banners of deregulation and “ownership society” propaganda) and sought to issue more risky loans far beyond what the CRA required because of the potential for higher rates of return. Remember “Lost another one to DiTech”? Who could forget besides the willfully blind? Anyone breathing and with a pulse during the past decade knew how aggressively companies pursued risky borrowers and as it turns out the motive for higher and higher profits obscured all other concerns. Wells Fargo was recently fined $85 million dollars for committing fraud against its customers by pushing them into higher interest sub-prime loans and, among other things, falsifying legal documentation. $85 million is a pittance compared to the tens of billions Wells Fargo received in bailout funds and the free money they continue to receive by borrowing money from the Federal Reserve at 0% interest but it still shows that nobody was forcing giant lenders into a precarious financial predicament. Nevertheless, the CRA myth will carry on. The allure of an easy answer that conveniently absolves the home team of responsibility and heaps it upon minorities is too great for them to resist. Which isn’t racist, of course.

-mg

7 Responses to ““But the CRA forced them to break the law!””

  1. mike Says:

    Let’s proceed:

    Jeromy: It’s funny how Dana always has to set up some elaborate construction of carefully chosen facts coupled with some schoolyard teasing instead of just looking at simple realities.

    Dana thinks Wall Street creates something…namely, “wealth.” Well, Dana, GM can’t put a Tonka truck on a lot and get somebody to finance it for five years, but Wall St. figured out a way to make shit loans look like gold. The result? A whole pile of wealth that wasn’t actually wealth, and thus the country faced a catastrophic collapse, one that overwhelmed most estimates. Lesser recessions have had higher unemployment numbers, including Reagan’s, and only a fool couldn’t have recognized early on that predicting the crest of the recession so early was bound to be inaccurate.

    “Porkulus plan” means a plan that was about half the size economists recommended, one third of it being tax cuts. I like to keep reminding Dana about the tax cuts and watch him never acknowledge it. That said, the stimulus bill has, as most economists at the WSJ agree, had a notable effect that kept the economy from getting even worse. Dana doesn’t like to acknowledge that either.

    “ObaminableCare” is a Republican health care reform bill that has little to do with directly healing the economy, and which hasn’t even gone into effect yet for the most part.

    Dodd-Frank has been stymied by obstructionist Republicans.

    Repeatedly referencing President Obama’s middle name is a racist dogwhistle.

    “At what point will (Dana’s #2 favorite president in his lifetime George W. Bush) bear any responsibility?” would be a better question.

    “Democrats managed to get all of their important economic legislation passed,” doesn’t even pass the laugh test. Obstructionist Republicans are also doing everything they can to stop the Consumer Protection Bureau from doing exactly what its name suggests.

    Let us note that Wall St. is doing smashingly, and all Republican dogma for the past 30 years says when Wall St. is doing well, the rest of the country should prosper. What’s up with that, Dana? All actual numbers indicate the rich aren’t being “job creators” because there’s no demand, that’s why they’re sitting on their money. Why build a factory for something nobody wants to buy? Dana’s business sense gets a little foggy when it comes to this point.

    And to preserve history and recognize the present, Dana was prepared to let the country fully crash in 2008 without TARP and he’s prepared right now to throw the country into another, even worse recession by threatening default on our debt.

    So what do we have? An arsonist picking on the fireman, suggesting that water must not work while he keeps dumping gasoline and flicking matches.

    Yeah, if you haven’t noticed, I’m done coddling bullshit, Dana. You crossed the line with the debt ceiling, and I hope to always remind you that you put a gun to the economy’s head and threatened to pull the trigger if we didn’t subscribe to your anti-tax theology. If Democrats do end up caving on this (already heard Harry Reid was ready), it’ll only be because they were the last sane ones, the ones who recognized the danger and relented rather than let the Republicans set off their suicide vests and take everybody out.

    You’re a guy who had good intentions but let radicalism push you off the path of righteousness, Dana. Too much damn hobknobbing with that clearly insane fool John Hitchcock, not enough heeding conservatives out there a lot smarter than you. It’s time to actually start behaving conservatively instead of just tossing the word around. You guys no more deserve to be called conservative than you deserve to be called Reaganites.

  2. mike Says:

    Dana:

    “Porkulus plan” means a plan that was about half the size economists recommended, one third of it being tax cuts. I like to keep reminding Dana about the tax cuts and watch him never acknowledge it. That said, the stimulus bill has, as most economists at the WSJ agree, had a notable effect that kept the economy from getting even worse. Dana doesn’t like to acknowledge that either.

    If you read President Obama’s own projections for the porkulus plan (which you can find here, in a .pdf file), you will find that, on page 4, Mr Obama’s minions wrote:

    Estimating the aggregate employment effects of the proposed American Recovery and Reinvestment Plan involves several steps. The first is to specify a prototypical package. We have assumed a package just slightly over the $775 billion currently under discussion. It includes a range of measures, all of which have been discussed publicly. Among the key components are:

    • Substantial investments in infrastructure, education, health, and energy.
    • Temporary programs to protect the most vulnerable from the deep recession, including increases in food stamps and expansions of unemployment insurance.
    • State fiscal relief designed to alleviate cuts in healthcare, education, and prevent increases in state and local taxes.
    • Business investment incentives.
    • A middle class tax cut along the lines of the Making Work Pay tax cut that the President-Elect proposed during the campaign.

    Now, which part of that didn’t the President get passed? And note that the size he suggested was less than what was actually passed.

    We tried to stop him, but we couldn’t; he got pretty much everything he asked for, and it has still failed.

  3. mike Says:

    Dana:

    “Democrats managed to get all of their important economic legislation passed,” doesn’t even pass the laugh test. Obstructionist Republicans are also doing everything they can to stop the Consumer Protection Bureau from doing exactly what its name suggests.

    OK, so what part of the Democrats important economic legislation didn’t get passed? Dodd-Frank was passed, and while you seem to think we’ve been able to frustrate it — would that we could! — John Walsh, the Acting Comptroller of the Currency recently said that there would be 15 to 20 new regulations issued under it, which would cause a “tsunami” in the mortgage lending industry.

    President Obama’s minions projected (see page 5 of this .pdf document) that, with the stimulus bill, GDP would increase by 3.7% and there would be 3,675,000 more jobs than without it. There is a graph included, which projects unemployment to be 7.0% with the plan, at the end of December 2009, versus 8.8% without it; actual December 2009 unemployment was 9.9%.

    President Obama set his own criteria for success; he defined it, and gave it hard numbers. By the objective criteria he set forth, based on his own plans, which were passed into law, he has been a miserable failure.

  4. mike Says:

    Dana:

    Maybe if I put it in California terms, you’ll understand it. If I’m trying to sell you a sports drink, and I claim that by using it, I’ll be able to run 2 kilometers in 7:00 minutes, but if I don’t, it’ll take me 8:48, yet, after using my sports drink, it actually takes me 9:54 to run the 2K, are you going to think, “Wow, that really is a great sports drink! It really did what Dana said it would!”

  5. Henry Whistler Says:

    http://www.theatlantic.com/politics/archive/2011/07/the-chart-that-should-accompany-all-discussions-of-the-debt-ceiling/242484/

    I’ll get to Dana later tonight, but right there is just another one of many pieces of info Dana cannot actually learn, else it puncture his bubble of bullshit.

  6. mike Says:

    One could just as easily point out that Republicans have gotten every tax cut they’ve asked for and the unemployment rate is still high.

    At what point are these historically low taxes and record-breaking corporate profits going to compute to jobs?

  7. Henry Whistler Says:

    One can tell Dana doesn’t have a leg to stand on because he isn’t replying directly or honestly, he’s just trying to come up with more elaborate constructions to distract from the basic fundamental realities I pointed out. When he feels like replaying, anyway, since he ignored most of what I wrote, the usual sign of a bullshitter.

    He never says anything that contradicts me. He just points to the story of an overly optimistic projection from some of President Obama’s “minions,” when the reality is that most everybody knew we were in for much worse.

    Still, the Republicans have become so wedded to exploiting that one overly optimistic projection that they can’t correct course for loss of their entire narrative.

    It doesn’t change the fact that the too-small stimulus was still effective at keeping unemployment a couple points lower than it would have been (Dana seems to miss the point that the initial projection only called for a 1.8% improvement, but his math falls to shit when it contradicts the party line).

    Common sense, which Dana seems to think he has in abundance, would suggest what a firefighter knows, that even if the fire is bigger than your initial projection, it wasn’t a waste to put out what you could with the water you had.

    Dana also knows, presuming he’s ever bothered listening to a liberal the past two years, that Obama tends to start out with a compromise between Democratic and Republican policies. Of course, the Republicans having absolutely no scruples or shame results in them dashing off to the right even further, and we inevitably get a compromise of a compromise. That’s why President Bush got the GOP to pass a health care expansion with no plans to pay for it, whereas Obama passes one with plans to pay for it and they go apeshit.

    Similarly, Obama has already dropped the Democrats and proposed full-blown Republican style deficit reduction plans, but the GOP *still* won’t have it. So yes, Obama does incur some blame for consistently trying to work with Republicans and getting sand kicked in his face. This precludes Dana’s implicit suggestion that if Obama has not done well with the economy, Republicans would do better.

    Again, Obama and the Democrats have been spraying water, the Republicans gasoline. That really does sum everything up.

    On the other hand, let’s look at Dana’s attempt at a metaphor:

    “Maybe if I put it in California terms, you’ll understand it. If I’m trying to sell you a sports drink, and I claim that by using it, I’ll be able to run 2 kilometers in 7:00 minutes, but if I don’t, it’ll take me 8:48, yet, after using my sports drink, it actually takes me 9:54 to run the 2K, are you going to think, “Wow, that really is a great sports drink! It really did what Dana said it would!””

    Except that the information, what one runs without the drink, is easily testable. The scale of the recession Bush left us with after GOP deregulatory policies allowed selling shit as chocolate ice cream was filled with uncertainty. Not to mention the other half-dozen problems with running 2K as an analogy for combating a crumbling economy.

    But that’s what Dana has to do, concoct more bullshit analogies and selective bits and pieces to create the false impression that President Obama’s policies, the ones he’s been able to get past an openly revolting (in more ways than one) obstructionist GOP, not only weren’t beneficial, but should cause the blame for the economy to be laid at his feet.

    And, of course, we should sit here and take seriously the words of a man who would have let the economy fall through the floor in 2008-9 and is trying to tank it again.

    Firefighter vs. arsonist, plain and simple. I mean, Republicans created our deficit problems through tax cuts and deregulation, and now they’re telling us our problems are too many taxes and regulations! Water vs. gasoline…I find the choice remarkably easy.

    Fool me once, but Dana, you’ve shown me twice that you’re more than happy to kill the US economy to satisfy your radical rightwing theological predilections. You’ve got no ground to talk to anybody about fiscal sanity, and the suggestion that your way presents a rational alternative to President Obama and the Democrats is simply absurd.