Wednesday, November 2, 2011

Sorry, but banks DID cause the mortgage meltdown

Posted By on Wed, Nov 2, 2011 at 3:39 PM

Conservative fantasies die hard, if they ever die at all. Most of us already knew that, but it's been reaffirmed by online comments and e-mails from readers about this week’s Boomer With Attitude column re: Bank of America. I love it when conservatives try to put the blame for the 2008 financial crisis and America’s foreclosure tsunami on anyone — anyone — but the banks. The standard Fox-driven fairy tale is that Freddie Mac, Fannie Mae and federal housing policy are the ones responsible for that big, fat mess. That, er, version of reality has been repeatedly debunked by such inconvenient things as actual facts and studies, but that simply doesn’t matter to the right’s true believers.

I’ve heard the argument over and over: Congress forced Freddie and Fannie to make a ton of crappy loans in order to increase the number of poor people who owned homes. A piece by ThinkProgress reports that even New York's Mayor Bloomberg got into the act the other day, defending banks against charges of having caused the economic meltdown, and placing the blame on — yep — Congress, Fannie and Freddie.
Now, Fannie and Freddie were to blame for some foreclosure messes, for sure, and I'm in no way defending their sorry work, but the vast bulk of the subprime loans that caused a huge bubble which eventually blew up in America’s face were made by private mortgage brokers. As ThinkProgress points out, a simple look at Federal Reserve data makes it clear. Note to Fox viewers and bank idolators: the following are what’s known as “facts.” We apologize for confusing you. The fact is that in a representative year of the housing bubble, 2006, more than 84 percent of the subprime mortgages were issued by private lending institutions. In addition, private firms made almost 83 percent of the subprime loans to low- and moderate-income borrowers in the same year.

ThinkProgress also notes that a huge majority of the high-cost loans were not covered at all by government laws that encourage home ownership, and “in fact, 94 percent of high-cost loans were totally unconnected from government homeownership laws.” Economists have repeatedly pointed out the fact — there’s that word again — Fannie and Freddie had “faded from the scene” during the zenith of the housing bubble. There are no illusions here that something as flimsy as real facts can unconstipate conservatives' thinking, i.e. parroting, on this issue, but hey, we gave it a shot.

Fox viewer thinking hard about the mortgage crisis
  • Fox viewer thinking hard about the mortgage crisis

Photo credit: respres

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