Blaming the Wrong Borrowers
Media Matters weighs in on the topic we wrote about Tuesday on TWI — the fact that blaming low-income and minority borrowers for the housing crisis is picking up speed as reason for the cause of the housing crisis.
Conservatives are blaming the Community Reinvestment Act, an anti-redlining law, by saying it forced banks to make bad loans in poor and minority neighborhoods.
Media Matters details some of the conservative commentary on this, but let’s just take all the politics out of it. Here’s Janet Yellen, president of the Federal Reserve Bank of San Francisco, on why it’s wrong to blame the CRA — and why it’s important to continue promoting homeownership among underserved borrowers:
There has been a tendency to conflate the current problems in the subprime market with CRA-motivated lending, or with lending to low-income families in general. I believe it is very important to make a distinction between the two. Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans, and studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households. We should not view the current foreclosure trends as justification to abandon the goal of expanding access to credit among low-income households, since access to credit, and the subsequent ability to buy a home, remains one of the most important mechanisms we have to help low-income families build wealth over the long term.
The worst thing to come of all of this would be to cut off worthy borrowers from credit, especially now.
In the meantime, why not focus on the borrowers who were truly irresponsible — you know, all those folks on Wall Street, the ones coming hat in hand to Congress to ask for your money.