The housing bubble that is now deflating and wreaking havoc with the economy was created by several factors, Glenn Beck said on his TV show today.
“The Fed and the politicians” are responsible, he said.
Activist groups were encouraged to agitate by the Carter-era Community Reinvestment Act, which enshrined in law a kind of lending protection racket. Banking regulators were given the power to make trouble for banks that failed to lend enough money to so-called underserved communities. Banks that paid enough — whatever that means — got left alone, but banks that didn’t, got their legs broken.
How much money is enough to satisfy the law? Even the Federal Reserve Board can’t say for sure. From the Fed’s online summary of the Act:
The CRA requires that each depository institution’s record in helping meet the credit needs of its entire community be evaluated periodically. That record is taken into account in considering an institution’s application for deposit facilities.Neither the CRA nor its implementing regulation gives specific criteria for rating the performance of depository institutions. Rather, the law indicates that the evaluation process should accommodate an institution’s individual circumstances.
One can almost imagine a CRA commissar saying, “It’d be a real shame if something happened to that nice bank of yours.” When in doubt about potential CRA liability, don’t risk committing a crime against diversity: make the loan. Or else.
After CRA came into effect, Saul Alinsky-inspired “community organizer” groups such as ACORN, the Greenlining Institute, and National Council of La Raza got into the shakedown business. They preach the hateful class-warfare rhetoric of their fellow community organizers Jeremiah Wright, Jesse Jackson, Al Sharpton, and Michael Pfleger.
Even though the left’s pathological preoccupation with economic egalitarianism never takes a vacation, the left isn’t entirely to blame for Wall Street’s current troubles.
The Federal Reserve Board encouraged bad behavior by keeping interest rates artificially low for far too long after the 9/11 attacks. Since money was cheap, bankers went overboard with exotic mortgage products, and investors kept inflating the housing bubble, sending home prices into the stratosphere.
But no one can deny the fateful role that liberal financial activist groups played in making a bad situation much worse.