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Politics : Politics for Pros- moderated -- Ignore unavailable to you. Want to Upgrade?

To: goldworldnet who wrote (334818)	11/21/2009 2:36:35 PM
From: KLP	3 Recommendations Read Replies (1) \| Respond to of 794358

How Little Law From '70s Brought The Financial System To Its Knees Posted 11/20/2009 06:51 PM ET investors.com This is the second installment of a Monday series excerpting the chapter on political implications from Thomas Sowell's latest book, "The Housing Boom and Bust." ________________________________________ IBD Exclusive Series: Thomas Sowell on The Politics of the Housing Boom ________________________________________ In recent times, government officials have increasingly pressured banks and other lenders to lend to people whom they would not lend to otherwise. One of the first federal government efforts to change the process of mortgage lending by private financial institutions was the Community Reinvestment Act of 1977. Like many government policies or programs, it began small and grew in scope and severity over the years. The Community Reinvestment Act directed "each appropriate federal financial supervisory agency to use its authority when examining financial institutions, to encourage such institutions to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of such institutions." These almost innocuous words nevertheless contain the implicit assumption that government officials are qualified to tell lenders to whom they should lend money entrusted to them by depositors or investors. Although the Community Reinvestment Act had no major immediate impact, over the years its underlying assumptions and provisions provided the basis for ever more insistent pressure on lenders from a variety of government officials and agencies to lend to those whom politicians and bureaucrats wanted them to lend to, rather than to those whom lenders would have chosen to lend to on the basis of the lenders' own experience and expertise. These pressures began to build in the 1990s and increased exponentially thereafter. Studies in the early 1990s, showing different mortgage-loan approval rates for blacks and whites, set off media sensations and denunciations, leading to both congressional and White House pressures on agencies regulating banks to impose new lending rules, and to monitor statistics on the loan approval rates by race, by community and by income, with penalties on banks and other lenders for failing to meet politically-imposed norms or quotas. These stepped-up pressures began during the George H.W. Bush administration and escalated during the Clinton administration, when Attorney General Janet Reno threatened legal action against lenders whose racial statistics raised her suspicions. It would be too much of a detour at this point to go into the details of these claims of racial discrimination by mortgage lenders. However, even at this point, the idea that lenders would be offended by receiving monthly mortgage payment checks in the mail from blacks should at least give us pause to assess whether or not it seems plausible — especially since a substantial majority of both blacks and whites had their mortgage-loan applications approved