The subprime mortgage collapse was government-caused

The crisis has its roots in the Community Reinvestment Act of 1977, a Carter-era law that purported to prevent "redlining" -- denying mortgages to black borrowers -- by pressuring banks to make home loans in "low- and moderate-income neighborhoods." Under the act, banks were to be graded on their attentiveness to the "credit needs" of "predominantly minority neighborhoods." The higher a bank's rating, the more likely that government regulators would say yes when the bank sought to open a new branch or undertake a merger or acquisition.

But to earn high ratings, banks were forced to make increasingly risky loans to borrowers who wouldn't qualify for a mortgage under normal standards of creditworthiness. The CRA, made even more stringent during the Clinton administration, trapped lenders in a Catch-22. "If they comply," wrote Loyola College economist Thomas DiLorenzo, "they know they will have to suffer from more loan defaults. If they don't comply, they face financial penalties . . . which can cost a large corporation like Bank of America billions of dollars."

Banks nationwide thus ended up making more and more "subprime" loans and agreeing to dangerously lax underwriting standards -- no down payment, no verification of income, interest-only payment plans, weak credit history. If they tried to compensate for the higher risks they were taking by charging higher interest rates, they were accused of unfairly steering borrowers into "predatory" loans they couldn't afford.

Trapped in a no-win situation entirely of the government's making, lenders could only hope that home prices would continue to rise, staving off the inevitable collapse. But once the housing bubble burst, there was no escape. Mortgage lenders have been bankrupted, thousands of subprime homeowners have been foreclosed on, and countless would-be borrowers can no longer get credit. The financial fallout has hurt investors around the world. And all of it thanks to the government, which was sure it understood the credit industry better than the free market did, and confidently created the conditions that made disaster unavoidable.

Source

*************************

ELSEWHERE

Support for war effort highest since 2006: "American public support for the military effort in Iraq has reached a high point unseen since the summer of 2006, a development that promises to reshape the political landscape. According to late February polling conducted by the Pew Research Center for the People and the Press, 53 percent of Americans - a slim majority - now believe "the U.S. will ultimately succeed in achieving its goals" in Iraq. That figure is up from 42 percent in September 2007. The percentage of those who believe the war in Iraq is going "very well" or "fairly well" is also up, from 30 percent in February 2007 to 48 percent today. The situation in Iraq remains fluid, of course. A surge in violence or in troop deaths could lead to rapid fluctuations in public opinion. But as the war nears its fifth year, the steady upturn in the public mood stands to alter the dynamics of races up and down the ballot. The repercussions will be most acutely felt in the presidential contest. Democrats Barack Obama and Hillary Rodham Clinton remain committed to a staggered pullout, while Republican John McCain holds steadfast in his support for the Bush administration's military surge."

Cheney Says US Needs Missile Defense: "Borrowing a theme from the presidential contest, Vice President Dick Cheney said Tuesday that the possibility of a 3 a.m. emergency call to the White House is all the more reason for the next commander in chief to follow through on President Bush's plans for a national missile defense. "It's plain to see that the world around us gives ample reason to continue working on missile defense," Cheney told the conservative Heritage Foundation at a dinner recognizing the 25th anniversary of President Reagan's Strategic Defense Initiative, a proposed network of rockets capable of shooting down incoming intercontinental ballistic missiles. Bush has set in motion a more modest version of Reagan's original plan"

Hillary still supports Spitzer: "Thus far, she has kept it to a curt, "I don't have any comment on that. Obviously I am sending my best wishes and thoughts to the governor and to his family . . ." Sending your best wishes, Sen. Clinton? To one of your top endorsers who's broken the law and participated in the sex industry that you yourself have decried? Clinton has touted her concern for women's rights frequently. Yet "Client 9" has escaped her scorn. Who is she more loyal to - the young women who are exploited for men's pleasure, or the exploiter who nearly drove her campaign off the rails with his harebrained scheme to give driver's licenses to illegal immigrants in the middle of presidential campaign season?"

Seth Grahame-Smith writing about Hillary Clinton at HuffingtonPost.com: "She has no idea how many times I defended her. How many right-leaning friends and relatives I battled with. How many times I played down her shady business deals and penchant for scandals. . . . She has no idea how frequently I dismissed her husband's serial adultery as an unfortunate trait of an otherwise brilliant man. For sixteen years, I was a proud soldier in the legion of 'Clinton apologists'. . . . And then she ran for president. She's proven that she cares more about 'Hillary' than 'unity.' More about defeating Obama than defeating the Republicans. She's become a political suicide-bomber, happy to blow herself to bits -- as long as she takes everyone else with her. On Friday, one of Barack Obama's foreign policy advisors, Samantha Power, resigned after calling Senator Clinton 'a monster' during an off-the-record exchange. It was an unfortunate slip, but one that echoed the sentiments of many Clinton apologists like me -- who've watched Hillary's descent into pettiness and fear-mongering with the heartbreak of a child who grows up to realize that his beloved mother has been a terrible person all along."

Iran's Eliot Spitzer: "Tehran's police chief, Reza Zarei, has been arrested after he was found nude in a local brothel with six naked prostitutes, according to report on the Iranian Farda News. Farda News is a website said to be close to the mayor of Tehran and former chief of the police forces, Mohammed Bagher Qalibaf. Following the raid, Zarei stepped down from his post as police chief. The news of his arrest however was not reported by any official Iranian news agency. According to a popular Iranian website Gooya, the order to raid the brothel was given directly by Ayatollah Mahmoud Hashemi Shahroudi, chief of the judicial authorities. Before he was arrested, Zarei was in charge of the programme for the 'moralisation of the city'."

British bureaucrats lose yet more ID data: "The Ministry of Defence is at the centre of a new security row, after the disclosure that 11,000 military ID cards have been lost or stolen in two years. Opposition parties said that the scale of the losses cast fresh doubt on plans for a national ID card scheme. The MoD said that it took the issue very seriously and steps were being taken to improve general security awareness. The cards have photographic ID on them "so it would be difficult for them to be used by individuals they have not been assigned to." MoD figures released in a Commons written answer said 4,433 cards disappeared in 2006 and 6,812 last year. Gerald Howarth, Tory defence spokesman, said: "This is another example of the Government's scandalous disregard for the security of our citizens and another reason why the public has no confidence in the Government's ID card plans."

For more postings from me, see OBAMA WATCH, TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, GREENIE WATCH, POLITICAL CORRECTNESS WATCH, GUN WATCH, SOCIALIZED MEDICINE, FOOD & HEALTH SKEPTIC, AUSTRALIAN POLITICS, IMMIGRATION WATCH INTERNATIONAL and EYE ON BRITAIN.

List of backup or "mirror" sites here or here -- for readers in China or for everyone when blogspot is "down" or failing to update. Email me here (Hotmail address). My Home Pages are here or here or here

****************************

"Why should the German be interested in the liberation of the Jew, if the Jew is not interested in the liberation of the German?... We recognize in Judaism, therefore, a general anti-social element of the present time... In the final analysis, the emancipation of the Jews is the emancipation of mankind from Judaism.... Indeed, in North America, the practical domination of Judaism over the Christian world has achieved as its unambiguous and normal expression that the preaching of the Gospel itself and the Christian ministry have become articles of trade... Money is the jealous god of Israel, in face of which no other god may exist". Who said that? Hitler? No. It was Karl Marx. See also here and here and here.

The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)

****************************