America's Leftist destruction machine grinds on regardless
The Justice Department is now extorting multimillion dollar settlements from banks, by accusing them of racial discrimination because they use traditional, non-racist lending criteria that minority borrowers are, on average, less likely to satisfy, such as having a high credit score, or being able to afford a substantial downpayment. Its Civil Rights Division chief, Tom Perez, “has compared bankers to Klansmen.” The “only difference, he says, is bankers discriminate ‘with a smile’ and ‘fine print,’” calling their lending criteria “every bit as destructive as the cross burned in a neighborhood.”
As Investor’s Business Daily notes in “DOJ Begins Bank Witch Hunt”:
In what could be a repeat of the easy-lending cycle that led to the housing crisis, the Justice Department has asked several banks to relax their mortgage underwriting standards and approve loans for minorities with poor credit as part of a new crackdown on alleged discrimination, according to court documents reviewed by IBD.
Prosecutions have already generated more than $20 million in loan set-asides and other subsidies from banks that have settled out of court rather than battle the federal government and risk being branded racist. An additional 60 banks are under investigation, a DOJ spokeswoman says. Settlements include setting aside prime-rate mortgages for low-income blacks and Hispanics with blemished credit and even counting “public assistance” as valid income in mortgage applications.
In several cases, the government has ordered bank defendants to post in all their branches and marketing materials a notice informing minority customers that they cannot be turned down for credit because they receive public aid, such as unemployment benefits, welfare payments or food stamps. Among other remedies: favorable interest rates and down-payment assistance for minority borrowers with weak credit. . .
Such efforts risk recreating the government-imposed lax underwriting that led to the housing boom and bust, critics fear. “It’s absolutely outrageous after what we’ve just gone through,” said former Rep. Ernest Istook, a Heritage Foundation fellow. “How can someone both be financially stable enough to merit a mortgage at the same time they’re on public assistance? By definition, you don’t have the kind of employment that can support such a loan.”...
In the new prosecutions, Justice acknowledges in every case it did not prove charges of intentional discrimination, while banks have denied any wrongdoing. Many, in fact, earned outstanding ratings from anti-redlining regulators enforcing the Community Reinvestment Act. Istook calls Holder’s crusade an “egregious overreach by the government.” He says many of the targets are smaller banks without the resources to fight a protracted legal battle. . .
As part of settlement deals, prosecutors have required banks to sign “nondisclosure agreements” barring them from talking about the methods used to allege discrimination. Bank lawyers contend the prosecutors are trying to hide the shaky legal grounds on which the cases are built. “It’s horrible what they’re doing at the civil rights division,” said Reginald Brown, a partner at Wilmer Hale in Washington, who has represented banks in connection to recent race-bias investigations. “They don’t have any proof, just theories.”
He added, “They want you to sign something saying you agree, under the condition of any settlement with them, that you won’t disclose what their theories were. That’s because their theories are loopy and wouldn’t stand the light of day.” One such theory — “disparate impact” — holds that merely a difference in loan application outcomes is enough to prove racial discrimination — even if no intent exists on the part of loan officers to contrast based on the color of applicants, and even legitimate business factors — such as credit scores and down payments — help explain disparities in loan outcomes between white and black applicants.
We wrote earlier about how the Obama administration is supporting lawsuits based on a “disparate impact” theory even in circumstances when the Supreme Court has said that the theory cannot be used, using such lawsuits to pay off liberal special-interest groups and trial lawyers with millions of dollars of taxpayer money.
The Investor’s Business Daily story illustrates two outcomes of this pressure to avoid “disparate impact”: lenders will make loans to people with bad credit — increasing future default rates and harming banks’ ability to stay afloat — and will make loans to minorities on preferential terms, engaging in racial discrimination.
Such lower lending standards can have disastrous results. A recent book co-authored by The New York Times‘ Gretchen Morgenson chronicles how federally-promoted lower lending standards spawned the financial crisis, and put minority borrowers into homes they could not afford.
“This is a story, the authors say, ‘of what happens when Washington decides, in its infinite wisdom, that every living, breathing citizen should own a home.’ Encouraged by politicians to expand home lending—not least to minorities and to households with few assets—[government-sponsored mortgage giant Fannie Mae] ignored reasonable standards of underwriting and piled up fugitive profits almost as fast as it increased risk to taxpayers.
The disaster is now measured in the hundreds of billions of dollars. As for the borrowers who were supposedly to benefit from Fannie’s mortgage-industrial complex, Ms. Morgenson and Mr. Rosner write that home ownership ‘put them squarely on the road to personal and financial ruin.’”
Banks and mortgage companies have long been under pressure from lawmakers and regulators to give loans to people with bad credit, in order to provide “affordable housing” and promote “diversity.” That played a key role in triggering the mortgage crisis, judging from a story in the New York Times. For example, “a high-ranking Democrat telephoned executives and screamed at them to purchase more loans from low-income borrowers, according to a Congressional source.”
The executives of government-backed mortgage giants Fannie Mae and Freddie Mac “eventually yielded to those pressures, effectively wagering that if things got too bad, the government would bail them out.”
Clinton-era affordable housing mandates were a key reason for the risky lending. A recent study by Peter Wallison, who had prophetically warned about Fannie and Freddie, found that two-thirds of all bad mortgages were either “bought by government agencies or required to be bought by private companies under government pressure,” a finding echoed by other recent studies.
Another law designed to prod banks to make loans in low-income communities, the Community Reinvestment Act, also contributed to the financial crisis, say the Wall Street Journal, Investor’s Business Daily, bankers, and economists. Yet Obama has sought to expand its reach.
But there is another way for banks to eliminate such perceived racial “disparities”: Refusing to make loans to whites who would otherwise receive them, curtailing the flow of available credit. Given a choice between making bad loans to minorities, and refusing to make a few good loans to whites, a bank may choose the latter, since profit on a good loan is smaller than the loss on a defaulted loan. This, too, causes economic harm.
Cutting off the flow of credit to businesses can deprive them of capital needed to operate and expand, causing a recession and mass unemployment. For example, the Roosevelt Recession of 1937 is linked by some economists to the Federal Reserve’s increase in reserve requirements, which left banks with less money to lend, causing a contraction in the money supply and drying up the flow of credit for businesses that otherwise would have employed people.
(That recession was also the product of Supreme Court rulings that upheld anti-business measures passed during the New Deal, like the National Labor Relations Act, which had previously been struck down by lower courts, but which the Supreme Court upheld beginning in 1937 in cases like NLRB v. Jones & Laughlin Steel Corp.)
Unemployment is already very high, thanks to Obama administration policies.
Close the door on public-sector unions
by Jeff Jacoby
MASSACHUSETTS GOVERNMENT is almost a wholly-owned subsidiary of the Democratic Party, so there was no chance that a law limiting collective bargaining for municipal employees would resemble the recent laws passed in Wisconsin and Ohio. The measure approved this week by Governor Deval Patrick and the state Legislature will hold down the cost of providing health benefits to teachers, firefighters, and other local workers by modestly curbing their unions' right to veto changes to employee health plans. For the ultrablue Bay State, that was a notable accomplishment. But it was hardly the "Union Busting, Massachusetts Style," that a Wall Street Journal headline hopefully predicted back in April.
The new laws in Wisconsin and Ohio prohibit collective bargaining over public-sector pensions and health benefits, and allow government employees to opt out of paying any union dues or fees. The Wisconsin law requires annual re-certification of all public employee unions; in Ohio, negotiated wage increases will have to be approved by voters if they would result in higher taxes. Nothing that sweeping was ever on the table in Massachusetts. Government unions may no longer have quite as much clout on Beacon Hill as they used to, but they still have enough to make Democrats think twice about confronting them.
No surprise, then, that the collective bargaining changes ultimately adopted were watered down significantly from the version approved by the state House of Representatives in April. That House vote reflected public sentiment -- a majority of Massachusetts voters believe government unions have too much power -- but in the face of union outrage, policymakers quickly promised to protect the unions' "seat at the table" and "meaningful voice" in setting health benefits for government employees. In April, the head of the Massachusetts AFL-CIO vowed to "fight this thing to the bitter end." This week, he happily acknowledged that the final language preserved "all we ever wanted, [which] was to have a voice."
That's too bad. Ensuring a "voice" for organized labor in government policymaking may sound reasonable, especially when those policies affect government workers. But collective bargaining in the public sector is in reality not reasonable at all. It is emphatically not like bargaining in the private sector, where unions representing labor contend with management representing owners for a share of the profits that labor helps create.
In the public sector, there are no profits to share. There are only taxpayers' dollars, which neither government employees nor government managers create. As for the taxpayers who do create those dollars, they have no seat at the table when public unions negotiate over wages and benefits. Instead, government sits on both sides, negotiating with itself over how to spend the people's money.
So unlike their counterparts in the private sector, public-sector unions are rarely constrained by market forces. There are limits to the wages and benefits that labor can demand from private employers. Corporations have to make a profit to stay alive, and both sides know that if costs rise too high, the results may be lost sales, eliminated jobs, or -- if worse comes to worst -- bankruptcy. Consequently, union negotiators cannot insist on the moon, and corporate managers dare not lose sight of the company's bottom line.
But that check and balance doesn't exist in public-sector collective bargaining. Teachers' or firefighters' or library workers' unions don't have to worry about jeopardizing the government's profits or driving away its customers: Government agencies can't go bankrupt, and their "customers" can't switch to a cheaper brand. So why not insist on the moon? Especially when the government managers on the other side of the table generally have little incentive to keep costs down. After all, if the pay, perks, and pensions of public workers send budgets through the roof, what choice do taxpayers have but to foot the bill?
At bottom, collective bargaining in the public sector is profoundly antidemocratic: It denies voters final say over the public policies they must live under, by forcing their elected representatives to shape those policies in concert with unions. In effect, it transfers to union officials -- interested parties not chosen by the people -- decision-making authority that they have no legitimate right to. That is why until just a few decades ago, it was universally understood that collective bargaining was incompatible with government employment.
Gradually it is becoming clear that throwing the door open to public-sector unions was a serious and costly mistake. It will take years to undo that mistake, but the process has begun. Even, if ever so slowly, in Massachusetts.
Bush years imposed crushing regulatory burdens: "Among the biggest lies told by liberals over the past few years is that the administration of President George W. Bush was some sort of deregulatory cascade, where rule after rule was rolled back, putting the public in more and more danger. Nothing could be further from the truth. The Bush years saw a massive bloating of the regulatory state, with more and more rules being issued by an out-of-control executive branch that didn't seem to care what it's only elected member thought about it."
TSA: Too Stupid for America: "Or maybe it stands for "Thousands Standing Around." Under the guise of making us safer, government has greatly expanded its role in airport security. But according a report released today, we're not very much safer. Since November 2001, there have been 25,000 security breaches in our nation's airports. And these are just the breaches that we know about. A few days ago, a man managed to fly from Boston to Newark with a stun gun. Like most failed government programs, many people think that the solution is to throw more money at the problem, even though the first version of the TSA spent far more than the private screeners they replaced, and since then the TSA's budget has increased from $4.7 billion in 2002 to $7.8 billion in 2011."
Fueling freedom: "Cries of outrage reverberated across the country when House Republicans, led by Rep. John Mica of Florida, chairman of the Transportation and Infrastructure Committee, proposed a 30 percent reduction in federal surface-transportation spending. Never mind that all Mr. Mica's plan does is limit spending to no more than the gas taxes and other highway user fees that fund federal surface-transportation programs. Still, cyclists and transit advocates are having hissy fits because Republicans would reduce subsidies to their favored forms of travel — subsidies paid, for the most part, by people who rarely ride a bike or use transit."
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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)