24 November 2008

The True Causes of the Subprime Crisis...

Right Wing myths about subprime loans are yet another attempt by the NeoCons to blame Liberals, for a mess that unbridled Capitalism made...


A Risk Worth Taking

Many ethical subprime lenders still manage to make plenty of money.

By Daniel Gross

"In recent months, conservative economists and editorialists have
tried to pin the blame for the unholy international financial mess on
subprime lending and subprime borrowers. If bureaucrats and social
activists hadn't pressured firms to lend to the working poor, the
narrative goes, we'd still be partying like it was 2005 and Bear
Stearns would be a going concern. The Wall Street Journal's editorial
page has repeatedly heaped blame on the Community Reinvestment Act
(CRA), the 1977 law aimed at preventing redlining in minority
neighborhoods. Fox Business Network anchor Neil Cavuto in September
proclaimed that "loaning to minorities and risky folks is a disaster."

"This line of reasoning is absurd on several levels. Many of the
biggest subprime lenders weren't banks, and thus weren't covered by
the CRA. Nobody forced Bear Stearns to borrow $33 for every dollar of
assets it had, and Fannie Mae and Freddie Mac didn't coerce highly
compensated CEOs into rolling out no-money-down, exploding adjustable-
rate mortgages. Banks will lose just as much money lending to really
rich white guys like former Lehman Brothers CEO Richard Fuld as they
will on loans to poor people of color in the South Bronx."

Read the rest HERE

20. January 2009: The End of an Error



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