"The New 'Welfare Queens'"

The attempt to blame minorities for the financial crisis is "disgusting":

The New "Welfare Queens", by Ed Kilgore: Throughout this long presidential campaign, there's been endless discussion of race as a factor. But until recently, such talk revolved around hard-to-assess white fears about Barack Obama's racial identity, along with efforts to conjure up the ancient hobgoblin of the Scary Black Man via images of Obama's former pastor, Jeremiah Wright.

Now, in the wake of the ongoing financial crisis, racism has entered the campaign conversation from an unexpected direction. In the fever swamps of conservatism, there's a growing drumbeat of claims that the entire housing mess, and its financial consequences, are the result of "socialist" schemes to give mortgages to shiftless black people whose irresponsibility is now being paid for by good, decent, white folks.

Some of this talk is in thinly-veiled code, via endless discussions on conservative web sites (though it spilled over into Congress during the bailout debate) attributing the subprime mortgage meltdown to the effects of the Community Reinvestment Act of 1977, which was aimed at fighting the common practice of mortgage "redlining" in low-income and/or minority areas...

A closely associated and even more racially tinged element of the conservative narrative on the financial crisis focuses on lurid claims about the vast influence of ACORN, a national non-profit group active in advocacy work for low-income Americans. Among its many activities, ACORN has promoted low-income and minority homeownership, mainly through personal counseling. More to the point, though it's unrelated to any of the claims about ACORN's alleged role in the financial crisis, the group worked with Barack Obama back in his community organizing days on the South Side of Chicago.

Now as it happens, I've never been a huge fan of ACORN, mainly because its ham-handed voter registration efforts in recent years have supplied Republicans with their only shred of evidence that "voter fraud" is a legitimate concern in this country. But ACORN, a relatively marginal group, had no real influence over toxic mortgage practices... Google "ACORN financial crisis" and you'll be treated to an amazingly huge number of articles and blog posts on the subject, virtually all of them from conservatives. None of them, so far as I can tell, establish that the group has had any significant involvement in mortgage decisions... ACORN is being singled out by conservatives for a leading role in the crisis simply because it's crucial to the whole CRA/Socialist/Minorities/Fannie Mae/Freddie Mac/Obama narrative about the financial crisis. And that narrative is not simply all over the internet: it's common on the airwaves as well, from Lou Dobbs to an assortment of "analysts" at Fox.

While some conservatives are careful not to get too explicit about the racial underpinnings of this argument, others aren't. As usual, we can rely on Ann Coulter to expose the raw id of conservative sentiment, as in a post on the financial crisis with the title: "They Gave Your Mortgage To a Less Qualified Minority," which deliberately played off the theme of a famous Jesse Helms campaign ad demonizing affirmative action.

Here's Coulter's take on the alleged impact of CRA:

Instead of looking at "outdated criteria," such as the mortgage applicant's credit history and ability to make a down payment, banks were encouraged to consider nontraditional measures of credit-worthiness, such as having a good jump shot or having a missing child named "Caylee."

Nice. The coda of Coulter's "argument" plows some very familiar furrows:

Now, at a cost of hundreds of billions of dollars, middle-class taxpayers are going to be forced to bail out the Democrats' two most important constituent groups: rich Wall Street bankers and welfare recipients.

Political correctness had already ruined education, sports, science and entertainment. But it took a Democratic president with a Democratic congress for political correctness to wreck the financial industry.

There you have it: once again, rich liberals in league with shiftless minority "welfare recipients" are sticking it to Joe Sixpack.

Coulter's uninhibited take seems to be closer to what we are now seeing and hearing among grassroots conservatives, whose anger is now visibly spilling onto the campaign trail, than the more circumspect "analysis" of her more "responsible" colleagues. ...

Perhaps it's an ironic sign of social progress that today's emerging racist stereotypes involve minorities getting behind on their mortgage payments, rather than "welfare queens" using change from their food stamps to buy vodka (the famous Ronald Reagan anecdote) or black men impregnating their girlfriends to live off those bountiful welfare payments. But it's still disgusting. As Rick Perlstein has righteously argued, it's a blood libel on people who exert no real power in this country. ...

UPDATE: ...I didn't quite close the loop on one element of my argument about what's going on with grassroots conservatives. When people at a McCain rally in Wisconsin started chanting "ACORN! ACORN!" earlier this week, most observers thought they were just upset about allegations of voter registration fraud... I'm convinced something much deeper was going on.

Grassroots conservatives have been fed a steady, toxic diet in recent weeks, on talk radio, on Fox, and in the blogs, of a narrative that suggests "Obama's ACORN" (with the complicity of Fannie Mae/Freddie Mac) created the financial crisis, is benefiting massively from the bailout, and is now trying to steal the election. This is a race-based Unified Field Theory that connects everything these folks fear and hate, and they want John McCain to talk about it, instead of all this bushwa about greedy lobbyists and bipartisanship.

On a broader front, this may represent the ultimate climax in the original and central dilemma of the McCain campaign: how to stay "bipartisan" and mavericky while channeling the passions of the conservative base. The whole contrived balancing act could well be blowing up, at McCain's own rallies.

Update: Brad DeLong:

John McCain: Dishonest and Dishonorable:Sam Graham-Felsen writes:

On a conference call earlier today, McCain campaign manager Rick Davis boasted that John McCain "blew up" the initial financial rescue package in order to keep funds from ACORN. However, McCain and his campaign had previously denied killing the bill, boasted that he brought Republicans to the table to support it and even claimed credit for its passage before it failed. ...

Comments

[rufus]

"When people at a McCain rally in Wisconsin started chanting "ACORN! ACORN!" earlier this week..."

Here I just thought they were extrapolating on the chant of "NUTS! NUTS"

"...instead of all this bushwa about greedy lobbyists and bipartisanship."

Brilliant! Afterall it is the 'bushwa' class supporting that platform.

All kidding aside, the race issue has not lingered that far below the surface as insinuations about Obama's 'militant' (or terrorist) stance have been pervasive, and growing less subtle. This is 'distasteful', and don't believe it will play well outside their base which has dwindled to it's core. Although I will also not be surprised by any claims that Obama et al are now using this opportunity to appear as the victims.

[anne]

http://krugman.blogs.nytimes.com/2008/10/10/not-about-the-financial-crisis/

October 10, 2008

Not About the Financial Crisis
By Paul Krugman

The crisis isn't the only scary thing going on. Something very ugly is taking shape on the political scene: as McCain's chances fade, the crowds at his rallies are, by all accounts, increasingly gripped by insane rage. It's not just a mob phenomenon — it's visible in the right-wing media, and to some extent in the speeches of McCain and Palin.

We've seen this before. One thing that has been sort of written out of the mainstream history of politics is the sheer insanity of the attacks on the Clintons — they were drug smugglers, they murdered Vince Foster (and lots of other people), they were in league with foreign powers. And this stuff didn't just show up in fringe publications — it was discussed in Congress, given props by the editorial page of the Wall Street Journal, and so on.

What it came down to was that a significant fraction of the American population, backed by a lot of money and political influence, simply does not consider government by liberals (even very moderate liberals) legitimate. Ronald Reagan was supposed to have settled that once and for all.

What happens when Obama is elected? It will be even worse than it was in the Clinton years. For sure there will be crazy accusations, and I wouldn't be surprised to see some violence.

The next few years are going to be very, very tough.

[anne]

http://angryarab.blogspot.com/2008/10/crowd-burst-into-loud-chants-of-u-s-u-s.html

October 10, 2008

"The crowd burst into loud chants of 'U-S-A! U-S-A!' "

* http://www.washingtonpost.com/wp-dyn/content/article/2008/10/09/AR2008100903169_pf.html

-- As'ad AbuKhalil

[Joe Fine]

Ed Kilgore's article is correct and extremely important. Anne Coulter's quote I think would have made some Nazi propagandists blush. Shocking that anyone respectable person would associate with her.

I doubt, however, that John McCain has ever had the moral conscience to reject this type of reasoning. He was after all a soldier in Reagan's army, and I suppose he showed the requisite contempt for welfare queens back in the 1980's. He has always given in to racists-- on the MLK holiday, then on the S.C. Confederate flag. Eventually he "sees the light" or uses his subsequent apologies to establish his bona fides for straight talk (talk about dumbing down honesty), but his first instinct is to capitulate to racists. In this day and age is there any better example of moral and political cowardice.

[anne]

http://thecaucus.blogs.nytimes.com/2008/10/10/new-mccain-ad-slams-obama-on-ayers-economy/?hp

October 10, 2008

New McCain Ad Slams Obama on Ayers, Economy
By Jim Rutenberg

In his increasingly slashing campaign against Senator Barack Obama, Senator John McCain this morning released a paint-peeling advertisement that highlights Mr. Obama’s relationship to Bill Ayers, one of the Weather Underground founders.

The spot calls Mr. Obama a liar, blames liberal Democrats for the sub-prime mortgage crisis, and, in giving them a traditionally Republican label, blames them for pushing “deregulation.” The campaign says the commercial will air nationally....

[KThomas]

anne, thanks for the posts, as always.

[rufus]

All aboard the 'Swift Boat' of 'Straight Talk'

[TigerPaw]

If the 1977 community reinvestment act is causing all the problems, how do the Republicans explain the expansion that happened under Saint Ronnie? Must have been a sneaky time delay explosion. Those sneaky evil lefties will stoop to anything.

Sadly I bet that's exactly what they'd say though.

[ken melvin]

Nothing to do with building 6million more houses than could be sold, I suppose?

[Patrick]

Noami Wolfe nailed it. The authoritarian right uses exactly the same tactics used by the Nazi's to goad the German population into a genicidal frenzy.

If things get really ugly the masses of nascar watching, cheese doodle eating denizens of the shopping mall wastelands are going to lock 'n load and ride heavy with their entitlement complexes looking for someone to punish for for the the repo of their Hummers and McMansions.

[dilbert dogbert]

Why haven't the wingnuts blamed the tanking stock market on the market reaction to a probable Obama win? Works for me.

[Barkley Rosser]

Yeah, I heard this racist drivel from one of the local conservatives around here in the Shenandoah Valley several weeks ago. Of course, the problem has been subprime mortgages being given to people because they could not afford the houses. But they could not afford the houses because of the bubble in housing prices. This started in 2000-01, rather a bit after the mandates to increase minority housing, which dated to the early 1990s.

[John aka Jean-Pierre]

That's it.

I'm moving to France.

[Ninja Zombie]

Tigerpaw,

Clinton modified the CRA in 1995. His modifications included allowing the securitization of subprime loans, and were accompanied by changes designed to encourage lower lending standards.

The idea that the 1977 CRA, as written, caused the current crisis is nothing more than a straw man. So is the idea that minorities caused it. But I guess it's easier to call your ideological opponents racist than to actually argue against their points.

[Barkley Rosser]

Ninja Zombie,

Fine, let us argue against their arguments. But let us also call a spade a spade and a racist a racist, and this is racism.

[ilsm]

The republican supporters' predatory lending (been going on as long as they could make a buck on repossessing the property) scam to minorities failed.

What they did was, as usual lent, money to folks who could not repay.

They expected that prices would rise and they would foreclose and make some good money.

The predators were caught in the cycle of declining prices.

Both the poor folks and the predators were harmed.

But neither the CRA nor the poor folk were responsible for wrapping up trashy loans and rating the bundles AAA.

In the campaign season the issues are clear.

The Mc Cain crowd is in the pocket of fiancial predators who blame their marks for their misfortune and stupidity.

The democrat crowd is at least saying "there is plenty of blame to be shared and some on the greedy, don't blame your marks".

What differences are more important, one side is owned by a few (does fascism come to mind) and the other seems to care about the 100 million familys onthe side line of ths debacle unfolding.

Besides, as a Vietnam era vet I will never support Mc Cain the Hanoi collaborator and playboy flyboy. MAny of us will never forget............

[Willful racist ignorance]

Anyone paying attention will have seen many through debunkings of the CRA charge (so you are either too ignorant to be commenting or, more likely, intentionally playing a racist game). Even the article has links debunking this idiotic charge, but that's just one of many, many demonstrations this wasn't the problem.

To still act like this is an open question in order to push this racist bullsh** is despicable. The changes in 1995 (which are misrepresented by the way - I assume intentionally) had nothing to do with problems many years later, that' absolutely clear. The CRA did not cause the housing crisis.

[ken melvin]

At this point, the builder who sold the surplus home for much more that it was worth and the original lender have walked away scot free with the loot in their pockets. The 'blamed' minority buyer who has a mortgage for which they can't make payments on a house worth much less than the face value of the mortgage is the victim.

[Penny Soaky]

I disagree that arguments and articles such as Ann Coulter's "They Gave Your Mortgage To a Less Qualified Minority" blame the minority borrowers. The onus of lending to unsuitable borrowers is on the lenders, not on the minority borrowers. It is not racism to note the proportion of these unsuitable borrowers who are minorities, nor to note that government policy mandates that unsuitable minority borrowers be given loanss.

[jeff hoffman]

"It is not racism to note the proportion of these unsuitable borrowers who are minorities, nor to note that government policy mandates that unsuitable minority borrowers be given loanss." Then by all means do so, since she clearly didn't.

[jeff hoffman]

You haven't the slightest clue as to what drove this, do you? People-believe it or not-made fairly easy money selling this stuff to whoever they could.

[That wasn't the policy]

This is a lie:

"government policy mandates that unsuitable minority borrowers be given loans"

Here's the truth:

"The law does not require institutions to make high-risk loans that may bring losses to the institution, instead the law emphasizes that an institution's CRA activities should be undertaken in a safe and sound manner."

"In the February 2008 House hearing, law professor Michael S. Barr, a Treasury Department official under President Clinton, stated that a Federal Reserve survey showed that affected institutions considered CRA loans profitable and not overly risky."

[jeff hoffman]

Thanks for clarifying that.

[roger]

What's funny, of course, is that those ACORN shouters could look in the mirror to see who drove the housing bubble. They could look over what they used their home equity loans for; they could read the emails they sent and received bragging about getting homes for low teaser rates. If the Bush administration and its compliant Fed chair, Greenspan, not created an easy credit regime, Bush would simply not have been elected in 2004 (as he was for the first time). The stark economic facts of life, the stagnating household incomes, couldn't have been papered over, and the questions about who was profiting from the early Bush boom years would have come up over and over. The aura of prosperity was crucial to that campaign. And it wasn't about getting ACORN's constituency to vote for Bush.

[Patricia Shannon]

That wasn't the policy and roger
Thanks for the info & insight.

[wjd123]

Has anyone entertained the idea that these people who get up at McCain rallies are plants used to frighten the timid over the idea of change? Not only do they get free media time but John McCain can play at "I'm the only one standing in their way.

[Patricia Shannon]

wjd123 says...

Has anyone entertained the idea that these people who get up at McCain rallies are plants used to frighten the timid over the idea of change? Not only do they get free media time but John McCain can play at "I'm the only one standing in their way.

Thank you. It is so obvious a possibility, given conservatives habitual behavior, I'm sorry I didn't think of it myself!

[Lafayette]

Slow and agonizing death

Article: In the fever swamps of conservatism, there's a growing drumbeat of claims that the entire housing mess, and its financial consequences, are the result of "socialist" schemes to give mortgages to shiftless black people whose irresponsibility is now being paid for by good, decent, white folks.

Nixon engineered the populist approach that the Republicans employed to tap into the Silent Majority. So, we should expect nothing less than such racial hypocrisy from the troglodytes who inhabit there.

This was bound to happen. Ho hum.

We have the same in France, from a jerk called Le Pen, who is so marginalized politically that he is not even anecdotal any more. The idiocy of white supremacy exists throughout most populations of Northern European origin. It just takes some crisis to prompt it out of the woodwork, where it should be condemned to a slow and agonizing death.

[german_reader]

"In the fever swamps of conservatism, there's a growing drumbeat of claims that the entire housing mess, and its financial consequences, are the result of "socialist" schemes to give mortgages to shiftless black people whose irresponsibility is now being paid for by good, decent, white folks."

Irresponsible, reckless debtors? Let's take an historical perspective.

In 1980 the home owner rate in the U.S. was 65.5%.

http://www.census.gov/hhes/www/housing/hvs/historic/files/histtab14.xls

Total mortgage debt at that time was according to the U.S. Flow of Funds statistics 926.5 billion or 34% of GDP ( $2.73 trillion ). In 2007 total mortgage debt was $10.5 trillion or 76% of GDP ( 13.8 trillion ) and the home owner rate 68.1%. That's more than a doubling of mortgage debt as a share of GDP over the last 27 years, while the home owner rate has increased by only 2.6%.

2.6% of U.S. households, around 3 million, responsible for a relative increase in mortgage debt of 42% of GDP or $5.8 trillion? That would be a debt burden of $1.93 million for every of these 3 million households. At an average house price of $230,000 that seems a bit high, especially for low income, "shiftless" people.

Could it be that it's not a small greedy minority ( at least not at the bottom ) which is responsible for the drastic increase in mortgage debt over the last three decades? That the average U.S. households of today can afford a house less than a houshold a generation ago? Why do Americans of today need so much more debt to buy a house than the generation of their parents? Why is the U.S. as a nation deeper in debt than ever before? And what has that to do with 25 years of supply-side politics, deregulation and a massive increase in inequality?

That's perhaps the kind of questions Americans should ask their leaders instead of blaming poor minorities for the current disaster.

[anne]

German Reader:

http://www.census.gov/hhes/www/housing/hvs/historic/files/histtab14.xls

In 1980 the home owner rate in the U.S. was 65.5%.

Total mortgage debt at that time was according to the U.S. Flow of Funds statistics $926.5 billion or 34% of GDP ( $2.73 trillion ). In 2007 total mortgage debt was $10.5 trillion or 76% of GDP ( $13.8 trillion ) and the home owner rate 68.1%. That's more than a doubling of mortgage debt as a share of GDP over the last 27 years, while the home owner rate has increased by only 2.6%.

2.6% of U.S. households, around 3 million, responsible for a relative increase in mortgage debt of 42% of GDP or $5.8 trillion? That would be a debt burden of $1.93 million for every of these 3 million households. At an average house price of $230,000 that seems a bit high, especially for low income, "shiftless" people....

[Ninja Zombie]

Anne: "2.6% of U.S. households, around 3 million, responsible for a relative increase in mortgage debt of 42% of GDP or $5.8 trillion? That would be a debt burden of $1.93 million for every of these 3 million households."

FAIL.

Your reasoning would only be true if house prices did not increase at all for the other 65.5% of homeowners. Of course, that's nonsense.

You should go back to calling people sexist and quoting Hamlet.

[anne]

"You should go back to calling people sexist and quoting Hamlet."

Notice the vile, vile rottenness.

[anne]

German Reader:

http://www.census.gov/hhes/www/housing/hvs/historic/files/histtab14.xls

In 1980 the home owner rate in the U.S. was 65.5%. Total mortgage debt at that time was according to the U.S. Flow of Funds statistics $926.5 billion or 34% of GDP ( $2.73 trillion ).

In 2007 total mortgage debt was $10.5 trillion or 76% of GDP ( $13.8 trillion ) and the home owner rate 68.1%. That's more than a doubling of mortgage debt as a share of GDP over the last 27 years, while the home owner rate has increased by only 2.6%.

2.6% of U.S. households, around 3 million, responsible for a relative increase in mortgage debt of 42% of GDP or $5.8 trillion? That would be a debt burden of $1.93 million for every of these 3 million households. At an average house price of $230,000 that seems a bit high, especially for low income, "shiftless" people....

[Nice.]

[X Man]

Truly dispiriting. It would be nice if it were possible for all the Democrats just to bow out for the next 4 years and let the Repubs run the show. Then in 2012 when we're all scavenging through dumpsters and trying to sell poison food to China we can come back and tell them to look around, the unbridled capitalism they're so fond of is really anarchy. But, of course, this isn't possible, or desirable, so Obama and the new Congress (60 Senators!) are going to have to hit the ground running, they've got about 3 months to move this mother and she's already run aground...

One good thing to look forward to - is that I really believe that most of the young kids today - under 30 - are much, much more broadminded about race then their parents and grandparents. In a few more decades you're going to see a lot less of this racial nonsense... but still got a long way to go

[Gramps]

Ninja Zombie says...

"FAIL."

What are you thirteen? Run along and play, please coume back to share your extensive knowledge when you're done cutting teeth.

says...

Those statistics on housing cast an interesting light on the controversy about measuring inflation. If housing prices, instead of the artifice of using a standard of what houses would rent for, had simply been included in the BLS index, then the Fed would have had to respond to housing inflation by raising interest rates when Greenspan lowered them. By giving themselves a statistical shuffle, the government deliberately screwed with its measuring equipment, producing what is obviously in retrospect a very wrong Fed policy. Interestingly, the Fed is, tacitly, responding to the deflation in housing, even though officially that deflation is smoothed out by the BLS artifice.
Time to change the way housing is reflected in the inflation index.

[Real Person from the Real World]

Kilgore may be onto something here. While I blame 30 years of Republican policies based on Milton Friedman and the Chicago School of economics, Republican acquaintances send links to a FOX News blog where angry citizen after angry citizen complains about all the dead beats who did not read their mortgage contract! Nothing is said about minorities mind you, but PC is now the norm, and I would pay money on a bet that those who read the papers and pay their mortgages are white, and those that didn't and *caused* the mess, were not. Everyone seems to forget the oh so clever investors that bought condos and houses to flip, not live in, or that some of the mortgages to more naive buyers were accompanied by exaggerated fees that went into the pockets of the middlemen/women who were overseeing the deals at now defunct banks.

Simplistic *welfare queen* explanations still seem to get a hearing by ears willing to accommodate this blather. No one even considers the role of investment backs and those fancy derivatives. The financial white collar types with their fat paychecks and big bonuses no matter what, are too envied to be even considered as partly responsible.

[german_reader]

"Your reasoning would only be true if house prices did not increase at all for the other 65.5% of homeowners. Of course, that's nonsense."

Ninja Zombie,

learn to read. I didn't say that the 2.6% of household or 3 million of new home owners were responsible for the dramatic increase in mortgage debt in the U.S. I said exactly the opposite. It's highly unlikely, because it would mean an individual debt burden for every of these 3 million households which is far beyond any realistic measure.

My theory would be that a combination of several factors, stagnant real mass incomes, record high house prices, artificially low interest rates, exploding health care costs or privatization of social risks, which suck of much of the free income of households etc., are behind this dramatic uprise in mortgage and private household debt.

What's exactly the reason, that's a question I leave to Americans.

[Real Person from the Real World]

Thank you German Reader for your very insightful and will explained comments. I hope somehow they sink into the brains of some of the overly conservative libertarian jerks in this country and regularly rant in this blog, that there is more to this crisis than blaming the victims. But what can you expect, when most of them support Sarah Palin, whose state charged rape victims for the crime testing supplies for their cases.

[Jim]

The concept of borrowing to spend never occurred to me. Rats. Too late now. Unfortunately, as a saver, My savings are half what they were. Double rats.

[brianbwb]

During the US' misadventures in South East Asia, war profiteers like Bechtel, etc, marked up costs, and thusly robbed the US economy of an estimated $13 trillion dollars, so devastating that the US government had to print currency just to keep some circulating, but their mistake was giving it to the banks, who immediately used it to speculate on the international currency markets, rather than invest in US production.

In 1972, Nixon was forced to sell the treasury gold on the open market, as countries holding US dollars started to demand the gold it was supposed to represent. To keep the dollar from immediately collapsing, Nixon took two steps, he convinced OPEC to accept dollars only for their oil, then he instituted a wage/price control that expired during Carter's term, saddling Carter with the blame for inflation.

Also in 1972, automakers closed entire factories, which reverberated through the steel, mining, rubber, and glass industries, even the entertainment industry. The middle class was decimated, and to date has never recovered.

The long held truism that the middle class was the engine of US economic growth was finally killed during the Reagan "trickle down" administration, another factor in severely diminishing the number of people who could actually afford loans, and forcing banks to find less suitable borrowers, then taking fees for volume over quality, but the real problem goes back much farther.

My point is that theories that fail to recognize the simple truth that without a viable middle class, economic collapse is the logical consequence of these "paper games" played by Wall Street to attract money by gambling on credit default swaps. CDS ($56 trillion, more than the entire global yearly GDP)are the main reason that collateral calls to institutions that are overexposed cause them to fail, and the poor had nothing to do with that.

[Lafayette]

Never the twain should meet

brianbwb: My point is that theories that fail to recognize the simple truth that without a viable middle class, economic collapse is the logical consequence of these "paper games" played by Wall Street

Good point, but in a land where regulatory control is considered ungodly -- after all, didn't God create the US as a showcase of freedom to the world?

Silly nonsense aside, industries, through their lobbies, continue to dupe both Congress and administrations into thinking that "self-regulation" is best for American industry, because "it saves jobs". Yeah, right, not to mention generating profits that become hallucinatory post-tax income (at a marginal rate of 28%) for our plutocrats.

Let's hope this recent disaster shows the American people that finance is not a rodeo where broncobusters are heroes. Finance must be a business where Risk Prone activities (Investment Banking) are secured behind a firewall from Risk Averse (Commercial Banking) activities -- and never the twain should meet.

Let's also understand, by extending the lesson, that Board Room shenanigans will continue until there is a legal framework for corporate ownership. The plutocrats have, presently, ALL the power in Boardrooms. That is lopsided, given that the vested interests of the corporation do not belong just to top management (the stakeholders) and stockholders, but to all its employees as well.

We must break down this US versus THEM barrier, in order to establish more harmonious industrial relations. And to assure that more of the wealth that corporations generate finally does trickle down to the lower rungs. That can only happen when employees have a board oversight capacity, by means of collective stockholdings.

En passant

Paulson is writing up a law that he hopes to pass through Congress that will allow the federal representatives to sit on the Boards of large banks. The reason for such is ostensibly to “protect the vested interests of the American taxpayer”.

Ok, let’s buy that as justifying a credible requirement. But, then, why does the American worker have no such vested interest in the companies for whom they work that would not require similar oversight responsibilities?

[Lafayette]

PS: The onus of lending to unsuitable borrowers is on the lenders, not on the minority borrowers.

Quite right.

Apparently the Truth in Lending Act lets you get away with predatory pricing for as long as it is stated clearly in the loan agreement and signed by the mortgagee.

So, we need a Credit Worthiness Bill that prevents mortgage agents to sell mortgages to people who cannot afford them, by means of a preliminary assessment of their net income after all debits for existing credit as well as all other expenses. If the resulting net income is below a certain amount that is considered not viable for the family then the mortgage is disallowed. And balloon payments down the line should be clearly outlawed.

This is how it is done in France and the default rates are less than 1%. I suspect the rest of the EU is similar.

Credit Worthiness calculations are an integral part of the mortgaging procedure. Should the documentation be falsified, the lending credit institution pays a heavy fine. The cases of falsification of documentation is exceedingly rare, the documentation being tax declarations (verifying income), three last pay slips (verifying active employment) and each checking or credit account statement for the past six months.