Financial Crisis Blamed on Minorities

by Zohra N.

Anyone who has their senses about them should know that redlining, defined best as a working form of institutional racism, was never good for America. (You can read the history of redlining here). In 1977, an act known as the  Community Reinvestment Act  was passed in attempt to allow for access to affordable housing. When Bill Clinton was president, his administration revised the act. Now that Act:

1. requires strict numerical assessments to get a satisfactory CRA rating;
2. uses federal home-loan data broken down by neighborhood, income group,
3. encourages community groups to complain when banks do not loan enough to specified neighborhood, income group, and race
4. allows community groups that market loans to targeted groups to collect a fee from the banks

Note that nowehere do the provisions ask for individuals with bad credit to receive mortgages. CRA calls for every creditworthy American to have access to affordable housing; that they have an equal opportunity to secure a mortgage.

Meet, from Minnesota, Rep Michele Bachmann, who I cannot stand and who the local indy media has likened to our very own Sarah Palin. Bachmann had this to say during a House Financial Services Committee hearing:

[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 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.

One of our Afropundits, Beve had this to say:

Funny, I didn’t know blacks and minorities carried that much weight–enough to bring the largest economy in the world to its knees.

Below is a statement from the Congressional Black Caucus:

We write as members of the Congressional Black Caucus asking that you clarify your caucus position on minority lending being the cause of the current financial crisis … There is no evidence to support Rep. Bachmann’s assertion that “minorities” caused the current financial crisis. Laws designed to open opportunities for equal access to credit does not require banks or thrifts to make loans that are unsafe or unprofitable. In fact, laws like the CRA mandate exactly the opposite. The law stipulates that CRA lending activities must be done consistent with safe and sound banking practices. Additionally, research clearly shows that the majority of the predatory loans that have led us to this financial mess were originated by non-bank financial institutions and other entities that did NOT have a CRA obligation and lacked strong federal regulatory oversight. Shifting the blame for the current economic crisis to laws that allow equal access and opportunity to communities of color is ridiculous.

Bachmann should know that, save for Fannie Mae and Freddie Mac, the banks that have gone under, or in the process of going bankrupt are not subject to CRA regulations. Read here.

Finally, if you get a chance, and would like to read in detail about housing in America, check out a great book: Capital and Communities in Black and White: The Intersections of Race, Class and Uneven Development by Gregory Squires. The book is a great insight on global and US economic disparities.