October 15, 2009

It was a real Wingnut-O-Rama on Fox yesterday when Rep. Michelle Bachmann of Minnesota went on Glenn Beck's show and expounded at length about ACORN's supposed involvement in the Community Reinvestment Act.

What they're trying to do, of course, is taint any kind of minority-advancement program by tying ACORN around its neck. Mind you, the CRA has been around since 1977, since well before ACORN's rise. But nevermind -- they just want to scare white people with false "facts" about minority advancement efforts.

For instance, Beck reiterates what is now right-wing legend:

Beck: You may remember -- or not -- the CRA, the Community Reinvestment Act, is the thing that makes banks makes banks lend money to people they don't want to loan money to because they have very low income and they're very likely to go under. It's often cited as one of the chief causes of the subprime mortgage meltdown.

This is, of course, a flat-out lie. In fact, as the Wikipedia entry explains, the CRA only forces banks to lend to people they don't want to because they're the wrong race:

Congress passed the Act in 1977 to reduce discriminatory credit practices against low-income neighborhoods, a practice known as redlining. The Act requires the appropriate federal financial supervisory agencies to encourage regulated financial institutions to meet the credit needs of the local communities in which they are chartered, consistent with safe and sound operation.

... The law, however, emphasizes that an institution's CRA activities should be undertaken in a safe and sound manner, and does not require institutions to make high-risk loans that may bring losses to the institution. An institution's CRA compliance record is taken into account by the banking regulatory agencies when the institution seeks to expand through merger, acquisition or branching. The law does not mandate any other penalties for non-compliance with the CRA.

Bachmann repeats Beck's lie and expands on it:

Bachmann: Well, it's stunning, Glenn. Just as you said, the Community Reinvestment Act is a creation of the federal government forcing private banks to make home mortgages to people who are very poor credit risks. No banks wants to do that. So the federal government in effect threatens banks and says, we're going to close down your interstate bank or we won't let you expand unless you make these bad loans to people or make loans that are unlikely to be repaid. Well, why would a bank want to do that?

Bachmann is outraged, outraged we tell you, that banks have been able to partner with ACORN in making loans to minority families (ACORN plays the role of guarantor, which actually means the loans aren't high-risk). But as Mary Kane at the Windy notes, the entire objection rests entirely on the grounds that ACORN is supposedly a proven evil and corrupt organization -- which has hardly, in fact, been proven. Unless by "evil" you mean "highly effective at getting minority voters to the polls." Which is clearly the case for Bachmann and the Turnip.

Moreover, the claim that the CRA caused the subprime meltdown is pure right-wing garbage. As FDIC chairman Sheila Bair explained:

Point of fact: Only about one-in-four higher-priced first mortgage loans were made by CRA-covered banks during the hey-day years of subprime mortgage lending (2004-2006). The rest were made by private independent mortgage companies and large bank affiliates not covered by CRA rules.

You've heard the line of attack: The government told banks they had to make loans to people who were bad credit risks, and who could not afford to repay, just to prove that they were making loans to low- and moderate-income people.

Let me ask you: where in the CRA does it say: make loans to people who can't afford to repay? No-where! And the fact is, the lending practices that are causing problems today were driven by a desire for market share and revenue growth ... pure and simple.

And as Aaron Pressman at BusinessWeek pointed out, the independent mortgage companies who were the chief offenders in the subprime meltdown were in fact never subject to the CRA.

University of Michigan law professor Michael Barr testified back in February before the House Committee on Financial Services that 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations.

Well, facts and reality have never made much of an impression on the Planet Wingnuttia domiciles of Bachmann and Beck. But isn't it funny how they focus so much energy on attacking programs that benefit minorities? Hmmmmmm.

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