Blaming the victims for the bank failures, especially if they are blacks or Latinos

Who is to blame for the failure of the mortgage banks on Wall Street and the mortgage lending crisis?

The plethora of candidates includes former Fed chairman Alan Greenspan, who never recognized the housing “bubbleâ€�; former Senator Phil Gramm, author of a last-minute 50,000-word amendment to a bill that unleashed bad lending; the greed of top executives in mortgage lenders, investment banks and hedge funds; predatory lending practices by companies working hand-in-glove with subdivision developers who steered would-be buyers to them; the refusal of conservatives to recognize that deregulation can lead to chaos; and their blind belief in the power of markets to solve any crisis.  

The Bush Administration and Congress, including some Democrats, were deeply involved, in addition to loosening regulations pushing Fannie Mae to expand its ability to buy “riskyâ€� loans.  My own candidates include all of these but also the stock market itself, which demands that public companies show that this quarter was better in terms of profits than their last or see their stock prices decline, which demand pushed the public companies (and those that were aiming to go public) into practices that they knew were terrible.

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    But today I need to focus on the candidates for culprits put forth by some conservatives of the loud-mouthed variety. They are blaming the victims, the families who have had their homes foreclosed on or who are in imminent danger of having them foreclosed. And they are pinpointing as promulgators of the “subprimeâ€� mortgage crisis, not all victims, just those who are black and Hispanic.  As the queen of demagogues, columnist Ann Coulter, put it succinctly: “They gave your mortgage to a less-qualified minority.â€�  

Blaming the victim is not new.  A book by that title, by an eminent sociologist, was published to wide acclaim in the 1960s; it showed in alarming detail how in many circumstances, and especially in ghettos, oppressors continually blamed the victims for their misfortunes and excused themselves from any responsibility. Blaming the victim was a racist strategy then, and it remains so now.  

Ms. Coulter pointed at a law passed during the Carter Administration, the Community Reinvestment Act (CRA) that encouraged banks to lend to people in the community. That law was intended to prevent the “red-liningâ€� that many banks had engaged in, but never mind that. Coulter shouts that this 1977 law opened the floodgates to unqualified people obtaining mortgages, and, in her words, made it possible for mortgage lenders to rely on personal characteristics — “such as having a good jump shotâ€� — rather than good credit ratings when deciding whether a loan was OK to make.  

Conservative columnist and former psychiatrist Charles Krauthammer wrote that the CRA, intended to help minorities, “led to tremendous pressure on Fannie Mae and Freddie Mac — who in turn pressured banks and other lenders — to extend mortgages to people who were borrowing over their heads.�

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Let me be very clear about this: I firmly believe that too-eager borrowers, who could not bother to calculate the risks involved in taking out a mortgage, are as much to blame as lenders who engaged in predatory lending practices. However, when a mortgage lender tells a single woman with a $50,000-a-year income that she can afford the mortgage on a $500,000 home (one documented case among many), that mortgage lender is being duplicitous and predatory, even if the crime does not cross the legal bar into fraud. A great many borrowers were gulled, but that does not absolve them from part of the blame.

Thom Edsall for the “Huffington Postâ€� blog interviewed several academic experts who all pointed out how odd it would be for the 30-year-old CRA to have triggered the subprime lending crisis in 2006-2007 that underlies today’s credit problems and big bank failures — but rational analysis does not interest those looking to blame victims.  

The likes of Demagoguery Hall of Famer Lou Dobbs of CNN, the editorial pages of the Wall Street Journal and the Washington Times, and even presidential candidate John McCain (in an interview with Larry Kudlow of CNBC) also climbed on the firetruck to hose the conflagration of the Community Reinvestment Act of 1977.  

Let there be no doubt: Fannie Mae did buy up mortgages that were “riskyâ€� and made to minorities and to too many first-time buyers, mortgages that a recent article on the front page of the New York  Times said were too complicated for Fannie Mae’s computer models to properly judge for the possibility that they might go under.                                                                                   

     But Fannie Mae didn’t make those loans in the first place.

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      I am indebted to various blogs for posting videos and links to such things as Fox Business News commentator Neil Cavuto placing the blame for the current financial crisis on mortgage-grantors “lending to minorities and other risky folks,â€� while a video of Barack Obama played in the background, and flagging attack-blogger Michelle Malkin’s rant, “Illegal immigration, crime-enabling banks, and open-borders Bush policies fueled the mortgage crisis. Half of the mortgages to Hispanics are subprime (the accursed species of loan to borrowers with the shadiest credit histories). A quarter of all those subprime loans are in default and foreclosure.â€�

Unfortunately, Michelle, a research report by a Heritage Foundation fellow undermines your statistics: according to privatization expert Dr. Ronald D. Utt, “Fannie Mae’s basic operating procedures do not target any particular type of buyer/ borrower.... Nine percent of the conventional conforming loans made by the private mortgage market were to first-time minority homebuyers. By contrast, only 4.7 percent of Fannie Mae loans and 3.5 percent of Freddie Mac loans over the same period were to first-time minority homebuyers.â€�  At the time, “minoritiesâ€� made up between one-third and 40 percent of the U.S. population.  

The wingnut mantra: When in doubt — and certainly when in fear that your own culpability in a mess might surface — blame the black and Hispanic victims.

Salisbury resident Tom Shachtman has written more than two dozen books and many television documentaries.