Stop Blaming The Poor For The Subprime Crisis

Go somewhere else for your scapegoats! An excellent column from the Miami Herald's Myriam Marquez, and carried in Vida En El Valle:

Blame the hedge fund managers. The subprime mortgages. Mismanagement at Fannie Mae, Freddie Mac. Detroit automakers' stubborn refusal to build more energy-saving vehicles.

Blame the regulatory apathy of the Bush years. The bookkeeping tricks. (War? What war? Not in W.'s deficit numbers.) The unregulated credit default swaps. The blind devotion to Wall Street without a thought for Main Street.

Most of all, blame unadulterated greed.

Just don't blame the working poor and middle-class folks who bought into the American dream that if you work hard, you can one day own your little castle. Don't play class warfare after a decade of corporate welfare.

Conservative talking heads and some members of Congress continue to blame the subprime loan mess -- which led to the housing collapse -- on a 1977 law meant to help poor communities build wealth. The Community Reinvestment Act (CRA) requires banks and savings and loans to make credit available to poor communities that bank with them. In the 1990s then-President Bill Clinton put more bite into the law by tying those institutions' expansion to their efforts to make responsible loans to working folks.

Remember red-lining by banks? Because those of us who grew up here certainly remember the abuses, when blacks and Hispanics couldn't get a break on a loan for a business or a home, even when non-Hispanic whites of comparable means got theirs.

Here's the truth: Most sub-prime loans weren't made by banks and savings and loans, which are subject to CRA rules. They originated with mortgage service companies -- remember all those ''deals'' online? -- or affiliates of banks that aren't beholden to CRA rules.

Ellen Seidman ran the federal Office of Thrift Supervision from 1997 to 2001, which oversaw savings and loans. She writes in The Ladder, a blog at the New America Foundation, that ``while many of us warned against bad subprime lending before the turn of the millennium, the massive breakdown of underwriting and extension of risky products far down the income scale -- without bothering to even check on income -- was primarily a post-2003 phenomenon. To blame a statute enacted in 1977 for something that happened 25 years later takes a fair amount of chutzpah.''

And here's the kicker: The Bush administration weakened CRA enforcement in 2005, and that's when the ''creative'' adjustable-rate mortgages shot up among banks and thrifts. Even then, they make up only about 20 percent of the subprime explosion, according to congressional testimony.

Were there poor people who got in over their heads? Absolutely -- and the vast majority weren't poor. Many were well-off speculators.