Many Americans are confused about why the housing market collapsed. The answer is quite simple: the government required lending institutions to engage in irresponsible behavior. They were required to make mortgages available to people manifestly unqualified to afford them. The Community Reinvestment Act (CRA) of 1977 was the hammer. The CRA was originally designed to make sure lending institutions did not discriminate with regard to making mortgages available in minority and low-income neighborhoods.
But, like many government programs, it mutated. In 1995, Bill Clinton ordered the Treasury Department to rewrite the CRA’s guidelines. Lending institutions with low CRA ratings could now be prevented from opening new branches, engaging in mergers, expanding their lending business, or be fined, if they failed to fulfill loan “quotas” in minority neighborhoods.
In other words, housing became a de facto extension of affirmative action programs.
After that, the lending institutions themselves “one-upped” the government. Why limit risky loans to the sub-prime market? Why not make them available in the primary loan market as well? Why not expand irresponsible behavior to its upper limits? The possibility of failure? Let’s “collateralize” failure and “spread it around.”
The rest is history.
Lessons learned? Of course not. Fannie Mae and Freddie Mac, the two biggest lenders in America, are still holding hundreds of billions of dollars of bad paper on their balance sheets. Yet they continue to make loans–and they astonishingly remain exempt from any regulations in the newly-passed Dodd-Frank financial “reform” bill.
To get an idea of how unsavory this latest program is, substitute the word “car” for the word “home.” Should American taxpayers be on the hook for someone’s car payments if they bought “more car than they could afford?” How about peoples’ credit card bills?
Aside from its embrace of irresponsible behavior, progressivism is also about the triumph of ideology over history. Very recent history. The Obama administration gave Americans tax breaks for buying automobiles. When they ended, car sales tanked. They gave Americans a tax credit of $8000 to buy a home. When those credits ended, home sales cratered to the lowest levels ever recorded.
Even with this program, some government officials believe one-in-five participants will default. That estimate is based on the track record of the Obama administration’s Home Affordable Modification Program (HAMP) which fell well short of its goal to assist 3 million homeowners. 1.3 million Americans enrolled in temporary modification programs. Half of them failed to qualify. Only one-in-three have gotten permanent, modified loans.
Americans with integrity are seething. It is an anger fired up by a federal government underwriting people with little or no integrity to the point of obscenity. It can be reduced to a single question asked millions of times: why am I being forced to pay someone else’s mortgage along with my own? It is an anger that will not be mollified until the ideology which refuses to recognize the necessity of allowing people to fail is relegated to the dustbin of history. Most Americans have no problem being “their brother’s keeper.”
Being “their brother’s enabler?” Immoral, plain and simple.
Arnold Ahlert is a contributing columnist to the politically conservative news and opinion site JewishWorldReview.com.
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