SOCIAL ACTIVIST POLITICS TO BLAME FOR U.S. MORTGAGE MELTDOWN

While many pundits are pointing to corporate greed and a lack of government regulation as the cause for the American mortgage and financial crisis, Stan Liebowitz, author of "Housing America: Building out of a Crisis," says it wasn't too little government intervention that cased the mortgage meltdown, but too much.

The form of government intervention that Liebowitz focuses on is minority homeownership. In a nutshell, he contends that the federal government over the last 20 years required the mortgage industry to get minority homeownership up, and sacrificed the country's financial foundation to achieve its goal.

To support his idea, he tracked reports and articles back to the 1990s, when the United States experienced a sudden surge in homeownership among minorities:

• An article in the Los Angeles Times from the late 1990s praised the surge, calling it "one of the hidden success stories of the Clinton era."
• But researchers claim that the success came at a great price; the Federal Reserve Bank of Boston even produced a manual warning mortgage lenders to no longer deny urban and lower-income minority applicants on such "outdated" criteria as credit history, down payment or employment income.
• A New York Times article from September 1999 states that Fannie had been under increasing pressure from the Clinton administration to expand mortgage loans among low-income people and that the corporation loosened its lending requirements to comply. [more, snip]

Such data demonstrates that when federal regulators demand parity between racial groups in lending, the only way to achieve the quotas was by making intentionally bad lending decisions.

READ MORE