It’s hard out there for a cool rich kid, looking for a minority to blame.

21 Dec 2011 12:37 am
Posted by: Donna


NYT editorialist Joe Nocera, tried to explain, yet again, how Fannie and Freddie were not, in fact, the “epicenter of the financial meltdown”, as Presidential candidate Michele Bachmann claimed at the most recent GOP debate.

Yet these real sins have been largely overlooked in favor of imagined ones. Over at the conservative American Enterprise Institute, two resident scholars, Peter Wallison and Edward Pinto, have concocted what has since become a Republican meme: namely, that Fannie Mae and Freddie Mac were ground zero for the entire crisis, leading the private sector off the cliff with their affordable housing mandates and massive subprime holdings.

Nocera’s piece linked to another one of his from January 2011:

But I wonder. Had there been a Dutch Tulip Inquiry Commission nearly four centuries ago, it would no doubt have found tulip salesmen who fraudulently persuaded people to borrow money they could never pay back to buy tulips. It would have criticized the regulators who looked the other way at the sleazy practices of tulip growers. It would have found speculators trying to corner the tulip market. But centuries later, we all understand that the roots of tulipmania were less the actions of particular Dutchmen than the fact that the entire society was suffering under the delusion that tulip prices could only go up. That’s what bubbles are: they’re examples of mass delusions…

…There is a telling moment in the commission’s report, when some A.I.G. executives are questioning whether they should stop insuring triple-A tranches of C.D.O.’s, which have become increasingly risky. In search of answers, they visit a housing analyst at Bear Stearns. One A.I.G. consultant later recalled that “the analyst was so optimistic about the housing market that they thought he was ‘out of his mind’ and ‘must be on drugs or something.’ ” But of course he wasn’t on drugs. His hallucinogen was the housing bubble.

In pushing the idea that the crisis was avoidable, Mr. Angelides is also trying to make an additional point: if we just do it better next time, we will avoid the next crisis. I’m all for holding the bad actors accountable, and to the extent the F.C.I.C. has done that, I tip my hat. But mass delusions, alas, are part of the human condition, and no report, no matter how scathing, is going to change that.

No report may do it but maybe we should tell the cool rich kids of the world to stuff it when they blame convenient scapegoats for their delusional and destructive actions. I lived in Ahwatukee (a suburban Phoenix village), which is known colloquially as “All-White-Tukee”, from 1999 to 2009. I was there at the height of the 2000s housing bubble. Every apartment there was “upgraded” to a condo, to take advantage of the mad upswing in housing values. Every third person I met, it seemed, was a real estate agent or a house flipper. As I recall, you were insane to opt for a boring traditional mortgage or home equity loan when there were so many great exotic and more lucrative options at your disposal!

I don’t recall any of this being geared toward inviting low income minorities into the 85044/85048 locale. I don’t recall one eager agent or mortgage broker confiding in me how the meanybutt Feds were forcing them to extend loans to low income minorities to satisfy Community Reinvestment Act or Fannie and Freddie requirements. Nope, I recall them being really stoked to make fat commissions, irrespective of who was buying homes or refinancing. I also don’t recall All-White-Tukee getting a speck browner during that heady time. And a Congressional inquiry concluded in January 2011 that loans to minorities under the CRA were “not a significant factor in subprime lending or the crisis.”

But hey, you’re having a real hard time convincing them that it’s “them”, and not you, who are the problem, right, rich kids? Must be that damn liberal media.


  1. Comment by Phoenix Justice on December 21, 2011 11:00 am

    The Community Reinvestment Act did not in anyway require banks (not mortgage companies like) to lend to minorities who did not qualify for financial reasons. The CRA required banks to stop the practice of “red lining” to lend to qualified buyers, regardless of race.

    Mortgage companies, such as Countrywide, had no such requirement. In fact, they geared themselves to lending to those who most clearly didn’t qualify financially.

    The banks never liked the CRA because they could no longer be openly bigoted toward minorities who had the financial means to secure a loan.

  2. Comment by Timmys Cat on December 21, 2011 2:45 pm

    No Gooper marching band seems to want to revisit the Phil Gramm led (and Democrat approved) gutting of the Glass- Steagall Act of 1933. By gutting the act, mortgages became a commodity for what seemed like anything called a financial institutution. As a commodity, the more you could bundle, the more you could sell, and the more you can make It was a Ponzi scheme until there weren’t enough prime loans to put a veneer on so many bundles. Interesting.

    Hee-hee! I live across the 10 from Ahwajerky. You nailed it. Still bunches of grumpy rude white people, but they were living in McMansions and driving them Escalades then. Lunch at a restaurant sounded like a boiler room operation with all the hot shots workin them phones/blackberries/laptops Snoozeyalooz! Igotthreepeeplebehindya!
    Affordable and housing were both antiquated foreign ideas. Simply a commodity to flip ASAP. Got pretty frantic with a good whiff of desperation near the end.
    Schadenfreude bay-bee!

  3. Comment by Timmys Cat on December 21, 2011 4:06 pm

    Totally off thread, but this is definetly not on my RESUME.

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