A Senator from Minnesota has made some controversial comments in the "blame game" when it comes to the economic crisis. Is it the fault of minorities?
Senator Michele Backmann has raised the ire of many people as
she placed the blame of the economic crisis on an unsuspecting target: minorities.
Bachmann made the accusation in a House Financial Services committee meeting last week, citing the Community Reinvestment Act and Bill Clinton as the fire-starters.
“[President Bill Clinton] turned the two quasi-private, mortgage-funding firms into a semi-nationalized monopoly that dispensed cash to markets, made loans to large Democrat [sic] voting blocs and handed favors, jobs and money to political allies. This potential mix led inevitably to corruption and the Fannie-Freddie collapse.”
“Loans started being made on the basis of race, and often little else,” she said.
The Community Reinvestment Act (CRA) was originally designed to fix some flaws that were institutionally discriminatory against giving loans to minorities. In fact, as Representative Barney Frank pointed out, the CRA made it against the law to hand out loans that were unsafe.
Bachmann … incorrectly points to the Community Reinvestment Act as a source of our current problems. CRA, originally passed in 1977, does not require banks or thrifts to make loans that are unsafe or unprofitable. In fact, federal law requires that CRA lending activities must be done consistent with safe and sound banking practices. In reality, most high-cost loans were originated by lenders that did not have a CRA obligation and lacked federal oversight.
The original CRA simply made it illegal for banks to target mortgage access and advertisements towards certain neighborhoods and exclude others, i.e. minority neighborhoods. Nothing in the laws stated loans had to be made. In fact, Clinton wasn't even the first to make a change in the CRA. It was
Bush 41 who signed into law that CRA's had to be rated on their performance because the CRA regulations were rarely enforced. The Savings and Loan crisis prompted him to do so.
What
Clinton changed was that there needed to be increased access to urban minority families. Again, not guaranteed loans, but access to them should they be qualified.
Bachmann contends that she isn't racist and that she was just reading an op-ed piece of someone else's writing. She was using it to outline her criticism of the CRA.
“I read a portion of an article critical of the Community Reinvestment Act, which I’m not a fan of. They were not my words.”
I'm not sure if I would call her racist, as some have done, but it sure was a crappy piece of material to read so you can outline your opposition to the CRA and blaming the economic crisis on it. I'm fairly certain that if you look around at who is foreclosing, which banks didn't screen their applicants and fed them lies, and which gotta-have-it lendees signed on 400K houses while only making 8 bucks an hour, you will see a spectrum of colors.
The CRA may have helped keeping this from being worse than it is.
