One of the stories making the rounds is that current economic situation is the fault of poor folk: specifically that government efforts to stop racial and ethnic profiling in bank lending practices somehow forced lending institutions to make loans to persons who couldn’t afford to repay them.
One of the laws mentioned in this
urban legend lie is the Community Redevelopment Act of 1977. This law was intended primarily to end the practice of redlining, under which lending organizations would refuse to lend to persons living in particular areas regardless of the creditworthiness of the loan applicants.
Joe DiStefano points out in yesterday’s local rag that (emphasis added):
In Philadelphia, CRA-compliant banks such as PNC and Mellon PSFS were pushed out of the inner-city home loan market in the late 1990s by subprime lenders. The latter weren’t subject to either the CRA or to traditional credit discipline, but found a ready market for higher-priced, high-risk loans on Wall Street.
In other words, the CRA had nothing to do with the ditzy mortgages that started all this. Blaming the CRA is as nonsensical as blaming Franny Mae and Freddie Mac, who got into ditzy mortgages late and only because it seemed the only way they could keep business. By then, the merry-go-round was already spinning too fast (follow the link for a fact-filled discussion of the roles of Fannie and Freddie).
But, you see, under Republican Economic Theory, the poor must be to blame.
Here’s how it goes:
1. Wealth = Virtue (see the proof here).
2. The wealthy, having wealth, are virtuous.
3. The virtuous do not do bad things.
4. The poor, having no wealth, are not virtuous.
5. The poor, not being virtuous, are to blame. For everything. Q. E. D.
No, poor folk did not cause this mess. (But other folks believe the scapegoating because, I guess, they just don’t want to take the time to determine whether there’s a fact behind each talking point.)
The current economic situation results logically from Republican Economic Theory.
Republican Economic Theory does not attempt to understand economics.
It is no more than a fancy suit of clothes to disguise the purpose of the Republican Party: to make the rich richer and the poor poorer.
(Slightly edited to correct poor phrasing at 20:08 EDT 11/03/2008.)