Activists Angered By Blame For Crisis
Friday, October 3, 2008
The head of the National Urban League is calling on Treasury Secretary Henry M. Paulson Jr. to refute statements by conservative politicians and pundits that subprime mortgages provided to minorities led to the financial crisis and a $700 billion federal rescue of Wall Street.
In a strongly worded letter to Paulson this week, Marc H. Morial said Paulson has "an obligation to correct the misinformation that is spread concerning the root cause of the current financial crisis."
Morial, a former mayor of New Orleans, said in an interview yesterday that the effort "to pin the subprime crisis on African Americans and Latinos" is a "big lie."
"It's an effort to shift the climate away from deregulation and the lack of oversight," he said. "The numbers are becoming clearer each day that a large number of people who ended up with a subprime loan could have qualified for a prime loan. That's the abuse that's inherent here."
Morial said he has not heard from Paulson. A spokeswoman at the Treasury Department was forwarded an electronic copy of the letter but did not respond.
On the House floor, on cable network television and in Internet blogs in recent days, conservative politicians and commentators have traced the problem to the Community Reinvestment Act, or CRA, enacted in 1977 to extend loans to minorities who were historically denied homeownership.
Rep. Michele Bachmann (R-Minn.) lashed out against the act, reading from an from Investor's Business Daily article that said banks made loans "on the basis of race and little else." Neil Cavuto, a business news anchor on Fox News, recently made a similar statement. In an exchange on television with Rep. Xavier Becerra (D-Calif.), Cavuto noted that the congressman pushed for more minority lending to "folks who heretofore couldn't get mortgages" and asked, "Are you totally without culpability here? Are you totally blameless?"
Defenders of the act say claims that it encouraged risky loans and caused the foreclosure crisis do not square with the facts of subprime lending.
Only a tiny fraction of subprime loans made since 2000 were ever generated to meet the goals of the act, which requires banks and savings-and-loan institutions to provide credit to their lower-income clients as well as their wealthy ones, they said.
John Taylor, president and chief executive of the National Community Reinvestment Coalition, an umbrella group that promotes access to credit and affordable housing, said such claims "are on the level of Swift boat advertisements, except they are even less factual."
"People who are saying this don't understand lending, but they sure do understand the political process," he said. "They are trying to blame the victim, which is an old strategy that moneyed corporate interests always employ."
Profit, he said, was the motive.
"People did not do this lending for CRA purposes. They did it because it was profitable."