Housing Policy

Fair Lending Isn't Fair


Eric Holder

For those folks who still don't understand how government meddling is responsible for the housing crisis, Investor's Business Daily recently posted a nice explanation:

At President Clinton's direction, no fewer than 10 federal agencies issued a chilling ultimatum to banks and mortgage lenders to ease credit for lower-income minorities or face investigations for lending discrimination and suffer the related adverse publicity. They also were threatened with denial of access to the all-important secondary mortgage market and stiff fines, along with other penalties.

This came into effect in 1994 through the "Policy Statement on Discrimination in Lending", spurred on by a Boston Fed study that claimed the discrepancies in the proportion of mortgages given to blacks, Hispanics, and whites was a result of "discrimination." But there is nothing wrong with"discriminating" between bad lending practices and good ones:

It took private analysts, as well as at least one FDIC economist, little time to determine the Boston Fed study was terminally flawed. In addition to finding embarrassing mistakes in the data, they concluded that more relevant measures of a borrower's credit history — such as past delinquencies and whether the borrower met lenders credit standards — explained the gap in lending between whites and blacks, who on average had poorer credit and higher defaults….

When these missing data were factored in, it became clear that the rejection rates were based on legitimate business decisions, not racism.

Still, the study was used to support a wholesale abandonment of traditional underwriting standards — the root cause of the mortgage crisis.

This outcome should have been obvious since about, well, 1994. But some people still don't get it. People like Attorney General Eric Holder who still thinks banks are racist for being simultaneously too tightfisted and too open-handed with minority borrowers.

Reason on Holder here, here, and here, and housing here.

H/T to the previously neglected John.

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  1. This post is racist, straight up.

    Also, fuck the government. So. Fucking. Maddening.


    1. fuck the government

      How about the root of all government?

      “Agriculture creates government.” ~Richard Manning, Against the Grain, p.73

      How about the whole cultural package of agricultural-city-Statism?

      Your rage is quite understandable, but too narrowly focused.

      1. STFU WI.

      2. This shit is so fucking stupid it’s incomprehensible.

    2. Holder wants to make sure the banks are fair to his people.

  2. A policy of forgiving or overlooking a person’s past actions solely based on the color of their skin counts as racism.

    1. But you know that someone is going to respond to this by saying that not treating a person differently because of the color if his skin is racist.

    2. Not treating a person differently because of the color if his skin is racist.

  3. Moar [WINGNUTZ] lize

  4. During the Middle Ages the nobility would borrow heavily from the Jews. When the loans came due, it was time for a Inquisition or Progrom.

    Other than the religious angle, nothing seems to have changed.

    1. They would borrow heavily from Church organizations and pull the same thing. Why do you think the Knights Templar got the works? When bankers obtained political power in the Italian city states and could prevent such seizures, it helped spark the renaissance.

  5. Yet another example of the Feds using laws, and regulations to strong arm private industry to get on board with the governments social policies.

    Comply to our will, or we will shut you down. Contribute to my campaign, or we will shut you down.

    1. there’s another organization that uses the same methods

      1. Comply to our will, or we will shut you down = Capitalism’s big-goverment artificial borders to restrict the free movement of free families on the Land.

        Capitalism is a Trail of Tears.

        1. {fapfapfapfapfapfapfapfap}

          Oh yes…oh Yes…oh YES…OH YEAH BABY YEAH!!!

          Read my muthafukking stupid muthafukkas! READ IT!

  6. Time for some verbal acrobatics from the Left on how this is nonetheless still the fault of the “free” market.

    I hope they warm up first. Acrobatics that vigorous could cause some pulled muscles.

    1. They think that the political class are just slaves to their greedy, corporate over lords. The left will say that that the “1%” wanted the Feds to impose these lending rules, so that the fat cats could fill up their pockets on the backs of the working man.

      1. You’re probably right, although I have trouble seeing how anyone could fill up his pockets by giving loans to people who can’t repay the debt.

        1. Because then they get to steal the house, which is what they were after the whole time! They just didn’t want to front the money to buy it themselves. Greedy bastards.

          1. “They just didn’t want to front the money to buy it themselves”

            Wait a second…

            Yeah, that basically shows how bullshit this whole thing. The idea that the banks came up with some convuluted plot to buy the land with their own money but only in an overly complicated way where they could “screw” people and then sell the land at a cut rate.

            1. Don’t you know? The only thing banks like more than making money is screwing poor people.

              1. As a banker, I can vouch for this.

                Rather than originating quality, performing loans that will make me money, I routinely seek out the poorest folks in the community and strong-arm them in to high-interest loans they have no ability to pay back.

                Not because it’s profitable, per se, but because it’s fun.

                1. Is it getting them to sign that gets you off, or is it the repossessing their stuff later?

                  1. It’s the bailouts, man. What’s the point of owning monkeyspoliticians if you can’t make them dance for you.


        2. although I have trouble seeing how anyone could fill up his pockets by giving loans to people who can’t repay the debt.

          They make money off the taxpayer, who is forced to bail them out when the loans finally go into default. Haven’t you been paying attention?

  7. the proximate cause, per the suits by AIG & CUNA, is malfeasence & misrepresentation by BoA & JP Morgan.

    >govt regs did NOT mandate malfeasence & misrepresentation.

    1. then why o why do wingnutz keep repeating this meme o3?

      1. because wingnutz are easily susceptible to foaming followed by fundraising.

        >send ur patriotic $$$ now now now !

        1. moar [wingednutzz] liez

            1. i made poopy in my [PANTZ]

    2. That suit is only over the sales of MBS, it has nothing to do with the underlying problem of lending money to people who couldn’t possibly pay it back.

      1. Pish posh! Daze awl gilteez, right Number 2????

      2. MBS misepresentation to shareholders, investors, & ratings agencies is proximate cause subject to legal adjucation. >RW radio entertainment doesnt rise to evidentary standards

        1. RW radionutz foaming the [BANKSTERZ] derpity flerp!

    3. govt regs did NOT mandate malfeasence & misrepresentation.

      Also known as FRAUD, right Orrin?

      1. what lil pointy-head point do u continue to try to infer? perhaps ur boy perry’s ponzi misrepresentation?

        1. what lil pointy-head point do u continue to try to infer? perhaps ur boy perry’s ponzi misrepresentation?

          Well, dipshit, if fraud is illegal, then Holder and Obama should be noted for dereliction of duty, should they not? After all, when they’re running the FBI, the DoJ, and the SEC, they’re kind of responsible for regulating the prosecution of blatant fraud in the misrepresentation of junk as AAA-rated securities. Or perhaps Pappy Bush simply had bigger balls than the Mocha Messiah.

          If fraud is not illegal, then “malfeseance and misrepresentation” don’t mean jack shit.

          And LOL at your goonfiction about “my boy perry.” Go back to playing with your GI Joes.

    4. Government laid the groundwork for this behavior. Fraud should be punished, but the root cause is Federal Reserve policy coupled with Congressional housing policy.

  8. They should really just send a letter to all of the people with savings in the bank telling them that DoJ is forcing them to give away their money to minorities (along with a copy of the DoJ’s statements and explanation where appropriate).

    Then the DoJ’s hands will be full dealing with actual hate crimes and racism and they won’t have time to fuck with the banks.

    1. The problem with this plan is that most businessmen don’t want to get sideways with the mafia, I mean government. Look how easily McDonalds folded to “voluntary” changes to the Happy Meal. But it is interesting to wonder, in the current climate, if telling the government to butt out could be a winning strategy.

      1. John Allison tried just that when he was heading BB&T, it didn’t end well. BB&T stayed out of the exotic asset business, feeling it would be bad for depositors (they also, out of principle, will not loan money to develop property obtained via imminent domain). Don Luskin dishes the dirt in his book I Am John Galt and at FreedomFest (Allison/BB&T bit starts around 29:30) – http://www.c-spanvideo.org/program/300700-1

  9. Here is a nice paper explaining the problems with the Boston Fed study:


  10. I’ll grant that this probably formed the catalyst the started the ball rolling, but as soon as Bush came to power, the banks didn’t have to keep lending to unqualified people. But they thought they had beat the system with their hedging schemes and dumping everything on Fannie and Freddie and once they became independent servicers, why bother assessing credit risk at all. Its someone elses problem.

  11. Your suggestion is a lot more creative than mine.

    I was only going to suggest the banks should just return the depositor’s funds (Pay up FDIC!) and shut their doors. No home, car, or business loans.

    Once the UAW, IBEW, and others were done with Clinton these kind of threats would never again see the light of day.

    But I guess “producers” only go Galt in novels, huh?

  12. Was there a gag order issued simultaneously? Sounds like the banks went along with it b/c of FDIC insurance, implied TBTF status, FRB bailouts, etc.

    Also, there had to have been a bank that read the policy memo and said fuck you.

  13. Here’s a question which popped into my head the other day (actually, it’s a recurring phenomenon):

    How much of our current economic malaise/debacle can be directly attributed to the Federal Reserve Bank’s “dual mandate”?

    If the Fed were charged solely with maintaining a stable money supply and price stability and not “full employment” or whatever other bullshit micromanagerial voodoo they currently engage in at the behest of Congress, there would in all likelihood have been no housing bubble, or any of the other bubbles we have seen in the past twenty or thirty years.

    But I’m probably just a crackpot.

    1. Probably?

      Don’t sell yourself short, P. You’re definitely a crackpot. But it’s okay, we’re all mad here.

      1. But it’s okay, we’re all mad here.

        True story. The people who are saying something as plainly obvious as “we haven’t any more money to spend looking for your unicorn” are seen as crazy loons who just want brown people to die by the “elite”.

    2. another false RW meme.

      >M2 is up ~3% FY10-11.

      1. And savings/CD rates have been nuked thanks to Bernanke’s ZIRP.

      2. itz [MEMEZ] all the way down herp!

      3. You don’t even read the posts you respond to, do you?

        1. moar than that. i preemptively answer the inferred wingnutz memes. >the money supply remains stable

          1. lol i ment to txt that 2 my bff jill… my bad guyz lol

          2. Please learn the difference between “imply” and “infer”, if you can.

    3. A lot of it. The Fed was supposed to have the single duty of insuring the integrity of the banking system and the dollar. You can’t do that and also make sure that there are no recessions or downturns in the business cycle.

      1. Are you feeling less neglected now John?

    4. The Fed is trying to fill the vacuum left by Congress’ abdication on fiscal policy – and creating more problems in the process.

  14. Eric Holder for new Lando Calrissian!

    1. Er….HODOR!

  15. another false RW meme.

    >M2 is up ~3% FY10-11.

    It continues to belch out irrelevant gibberish.

    Keep up the good work, Cletus.

      1. “Boy, when we get home I’m gonna punch yo mamma right in the mouth!”

    1. ur correct that these continued false RW memes about the fed are “irrelevant gibberish”. >M2 remains stable

  16. People like Attorney General Eric Holder who still thinks banks are racist for being simultaneously too tightfisted and too open-handed with minority borrowers.

    The new thing is to not claim that banks discriminate against minorities in their lending standards, but that they discriminate by overcharging minorities for loans.

    It goes like this:

    There’s a lot of data out there showing that, on average, loans made to minorities include more points and yield spread than loans made to whites.

    So it seems pretty simple, right? Banks are overcharging minorities.

    Except it’s not that simple.

    Since the banks are forced to window dress their portfolios with loans to minorities, the banks themselves have to pay a premium to acquire those loans. Minority borrowers who insist on “keeping their business within the community” go to local brokers with the same color skin as they have, and those brokers proceed to rape them with fees. Or the banks have to recruit loan officers with extensive minority community contacts, who then use those contacts to generate greater commissions for themselves.

    So basically, after pointing a gun at the banks and ordering them to acquire minority loan business at any cost, the feds are now pissed that the cost for a minority member to get a loan rose.

    Because they are fucking morons.

  17. Almost makes you think that government should have stayed out of the mortgage industry.

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