AG Harris’ housing bubble lawsuits ignore what inflated bubble
Feb. 10, 2013
By Chris Reed
California Attorney General Kamala Harris is among the many Americans of all political persuasions who are outraged that few are taking the fall for the grotesque irresponsibility that led to the housing bubble, its collapse, and the recession of the past six years.
She sued quasi-federal mortgage-issuing giants Fannie Mae and Freddie Mac in December over their foreclosures of 12,000 homes in California. Last week, she targeted Standard & Poor’s over the credit-ratings agency’s high marks for many firms involved in the bubble.
But Harris, who is half black and half Indian-American, is doing more than a little grandstanding here. Like most politicians and most of the media, she chooses to ignore the coarse racial politics that led both George W. Bush and Bill Clinton to push policies that inevitably inflated the housing bubble. It’s the uncomfortable back story that is usually ignored in favor of the tidy narrative of evil Wall Street and supine regulators.
On June 17, 2002, Bush announced a drive to get 5.5 million minorities out of apartments and into their own homes. The primary method amounted to affirmative-action lending — eliminating down payments and loosening income requirements. As The New York Times noted in a 2008 analysis, Bush’s primary means of achieving this end was insisting that “Fannie Mae and Freddie Mac meet ambitious new goals for low-income lending.”
Against this backdrop, Harris’ insinuation that Fannie Mae and Freddie Mac were racially predatory looks grossly demagogic. This is from a Huffington Post account of her lawsuit:
“Harris also called on Fannie Mae and Freddie Mac to disclose whether they have complied with civil rights laws protecting minorities and members of the Armed Forces against unlawful convictions and foreclosures.”
So if affirmative action backfires, the quasi-government agency pursuing affirmative action under pressure from the president faces civil liability?
Clinton’s role in inflating the housing bubble was every bit as direct as Bush 43′s. In 1997, he appointed Andrew Cuomo, the current New York governor, to be secretary of housing and urban development. Cuomo had little banking or lending expertise, but he had a broad banking and lending agenda. Veteran journalist Wayne Barrett laid out his folly in a 2008 analysis in Village Voice:
“Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis. He took actions that — in combination with many other factors — helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments. He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded ‘kickbacks’ to brokers that have fueled the sale of overpriced and unsupportable loans. …
“Perhaps the only domestic issue George Bush and Bill Clinton were in complete agreement about was maximizing home ownership, each trying to lay claim to a record percentage of homeowners, and both describing their efforts as a boon to blacks and Hispanics. HUD, Fannie, and Freddie were their instruments, and, as is now apparent, the more unsavory the means, the greater the growth.…
“Cuomo … did more to set these forces of unregulated expansion in motion than any other secretary and then boasted about it, presenting his initiatives as crusades for racial and social justice … .”
Somehow I doubt this coarse and depressing history will be mentioned by Kamala Harris, who is an utterly conventional California Democrat despite her exotic background and moralistic rhetoric. Wall Street did behave with gross irresponsibility, Standard & Poor’s did fail as a credit-ratings analyst, and thousands of other white-collar types did behave unethically. But the ethical failing that started it all was bipartisan racial pandering dressed up as the pursuit of “social justice.”
The result here in the Golden State:
“Latino and African-American homeowners in California have experienced foreclosure rates 2.3 and 1.9 times that of non-Hispanic white borrowers. Latino borrowers alone make up 48 percent of all foreclosures.”
That is from a 2010 report by the California branch of the Center for Responsible Lending. How perverse that from 1997 to 2006, the Center for Irresponsible Lending was at 1600 Pennsylvania Ave.
May 21, 2013