You thought the housing crisis was over

The American Spectator’s William Tucker reports that the Community Reinvestment Act is back, as if 2008 never happened. It’s another fine example of how political ideology and corruption has taken over Washington. Tucker writes:

Do you remember that thing about how the banks wouldn’t lend to blacks and Hispanics because they were racists? And do you remember how they passed the Community Reinvestment Act so that banks were forced to reduce down payments practically to zero and lend to a lot of people they knew were bad credit risks? And do you remember how Wall Street bundled all these risky subprime mortgages and sold them to investors around the world so that when it became clear that those people weren’t going to be able to pay their mortgages banks everywhere were left holding the bag and all five of the Wall Street investment houses either went under or had to be bailed out by the federal government? …And do you remember how all this cost the government close to a trillion dollars and put the whole economy in a hole that we really haven’t begun to dig ourselves out of yet?

As Tucker reports, the whole thing is about to happen again. The government is starting a “new” program to force banks to lend to low-credit-rated blacks and Hispanics. If banks don’t they will be hit with fines.

More astoundingly, according to Tucker, politicians are trying to force credit rating agencies to change their reporting standards to boost the scores of poor people of non-white lineage. This will give the banks the cover they need to give minorities mortgages even though they are a bad credit risk. Tucker continues:

[T]he Consumer Finance Protection Bureau has just announced that it is adopting a 20-age “Policy Statement on Discrimination in Lending” …. Part of the policy statement reads, “Applying different lending standards or offering different levels of assistance to applicants who are members of a protected [i.e., minority] class is permissible in some circumstances. Providing different treatment to applicants to address past discrimination would be permissible if done in response to a court order.”

According to Tucker, the new Consumer Finance Protection Bureau rules also mean that banks will no longer be able to turn down minorities from getting mortgages just because they are receiving public assistance such as unemployment benefits, welfare payments or food stamps!

Have politicians lost their minds?

Conclusion:

Politicians have not lost their minds. They know exactly what they are doing. It is politics as usual, with other people’s money. These new measures, if enforced, may help temporarily reflate the housing market in some areas, especially inner cities where there is a high density of minorities. However, these policies also will increase the debt loads of people who cannot handle the debt. It will also drive up the housing costs for people who can least afford it—the minorities the politicians are supposedly trying to help. Most dangerously, these policies may set the stage for another financial crisis—and this time America may not have enough money to bail out the banks.