Monday, March 02, 2009

Pay No Attention To That Diversity Mandate Behind The Curtain

Steve Salier, as ever, is blunt:
In recent decades, “diversity”has become one of America’s sacred mantras, propagandized relentlessly in the schools and the press. Expressing skepticism about the diverse within internal business communications has become, in effect, a civil offense, punishable in anti-discrimination lawsuits.

Not surprisingly, self-interested manipulators learned to play the race card to justify their machinations.

Thus, the universally-endorsed societal necessity of lending more money to minority homebuyers was used to justify both regulation (such as the Community Reinvestment Act) and deregulation (such as the hands-off approach to subprime bucket shops). Any practice positioned as helping minorities achieve their fair share of the American Dream had the wind at its back.
Consider, for example, three huge Southern California originators of dubious debt—Ameriquest, New Century, and Countrywide—all of which collapsed in recent years when Wall Street and the big banks finally wised up to the mortgage-backed securities they peddled.
E. Scott Reckard and Mike Hudson reported in 2005 for the Los Angeles Times on Ameriquest, then the biggest subprime originator:
Borrowers were told what their income had to be to qualify, these ex-workers said, and they were often coached to invent fictitious side jobs, such as home-based computer consulting, to hit the mark. Nearly one out of every six Ameriquest mortgages sold to Wall Street investors in 2004 was a stated-income loan, according to a Times analysis of 90,000 Ameriquest mortgages listed in filings with the Securities and Exchange Commission."[Workers Say Lender Ran ‘Boiler Rooms’, February 4, 2005]
The Left claims that the rise and fall of the subprime peddlers demonstrates the iniquity of the rightwing ideology of deregulation.

But this dishonest assessment blatantly ignores *who* was doing the deregulation, and *why*. The Affirmative Actioneers were doing it for Affirmative Action. When it came to mortgage lending to minorities, as regulated by the Community Reinvestment Act and other anti-discrimination laws, excessive skepticism was made illegal. Lenders and investors were only allowed to err in one direction.

Not surprisingly, excessive credulity came to dominate the system.

By no means were all the subprime peddlers sincere believers in the dogmas of multiculturalism. Instead, they knew they could wield political correctness like a club to scare off regulators.

Thus, to avoid inconvenient investigations, the owners of subprime mortgage originators tended to present themselves to politicians and the press as financial statesmen, moral leaders in the war on bigotry against minority borrowers.

Sue Kirchhoff reported in USA Today on April 17, 2007 in Subprime lenders’ big gifts helped lawmakers:
The nation's top subprime lenders, including New Century Financial (NEWC), which has filed for Chapter 11, have lavished generous donations on homeownership programs sponsored by black or Hispanic members of Congress. The paid sponsorships give lenders an entree to lawmakers and their constituents. Along with New Century, backers include Countrywide Financial (CFC), which settled a New York fair-lending investigation in 2006 by agreeing to compensate black and Latino borrowers for improper loans and set up a $3 million consumer-education program. Another is Ameriquest Mortgage, which in 2006 agreed to a $295 million settlement with state attorneys general who charged it with improper lending practices.
Similarly, Susan Schmidt and Maurice Tamman of the Wall Street Journal reported on January 5, 2009 in Housing Push for Hispanics Spawns Wave of Foreclosures:
The Congressional Hispanic Caucus created Hogar in 2003 to work with industry and community groups to increase mortgage lending to Latinos. At that time, the national Latino homeownership rate was 47%, compared with 68% for the overall population. Hogar called the figure 'alarming,' and said a concerted effort was required to ensure that 'by the end of the decade Latinos will share equally in the American Dream of homeownership.'

Hogar's backers included many companies that ran into trouble in mortgage markets: Fannie Mae and Freddie Mac, both now under federal control; Countrywide Financial Corp., sold last year to Bank of America Corp.; Washington Mutual Inc., taken over by the government and sold to J.P. Morgan Chase & Co.; and New Century Financial Corp. and Ameriquest Mortgage Corp., both now defunct.

Hogar's ties to the subprime industry were substantial.
Sorry, the derivative bubbles would never have inflated that high if Fannie and Freddie were not standing by to underwrite it all. Private bankers were *competing* with Fannie and Freddie, who were operating under Affirmative Action rules, and who *instituted and fomented* the 40 to 1 leverage. Policies have consequences.

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