In order to fully understand the genesis of the mortgage crisis we need to examine policies and practices that have slowly occurred over the last 3 decades beginning with the Carter administration. In 1977 the Community Reinvestment Act was passed by Congress under pressure from ‘progressive’ community organizations advocating liberal lending standards to meet the needs of low income borrowers . In fact, banks were evaluated by federal regulators to ensure they were in compliance with the loose underwriting standards. The result of those assessments were used to weigh future applications for mergers, acquisitions and branches. In other words banks were encouraged to portfolio some bad loans in order to improve their chances of being granted favorable reviews.

Thomas J. DiLorenzo professor of economics at Loyola College in Maryland describes in some detail the effects of those policies on the financial markets and the contributing factors of the current economic climate. DiLorenzo claims that “community groups” like ACORN use the threat of issuing a ‘protest’ to enforcement agencies because the law is set up so that any bank merger, branch expansion, or new branch creation can be postponed or prohibited if a CRA “protest” is issued by a “community group.” This can cost banks great sums of money, and the community groups understand this perfectly well. It is their leverage. They use this leverage to get the banks to give them millions of dollars as well as promising to make a certain amount of bad loans in their communities.

The effect of these policies forced banks to increase fee’s on higher risk or “subprime” loans. The same community groups who extorted money from banks then claimed that the higher fee’s are “predatory”, resulting in price controls legislated by lawmakers and regulated by Government agencies.

Stan Liebowitz Professor of Economics in the Business School at the University of Texas reports in the New York Post that in the early 1980’s left wing activist groups such as ACORN claimed that redlining practices by lending institutions unfairly discriminated against minority borrowers. Data verifies that minority borrowers as a whole are in fact in many cases poorer, and therefore not qualified for mortgage loans. Ignoring the facts, political pressure from these so called ‘community groups’ resulted in amendments to the Home Mortgage Disclosure Act requiring lending institutions to collect racial data on borrowers. That data was so badly flawed that according to Liebowitz it included “thousands of egregious typos, such as loans with negative interest rates. Our study found no evidence of discrimination”.

There can be no doubt that greedy lenders, greedy title companies, greedy appraisers, unscrupulous mortgage brokers and irrational borrowers were willing participants in the second greatest economic collapse in American history.

But the fact remains that the slippery slope of left wing ideology at work for 30 years made it possible. This is a perfect example of the stark differences of the ideological struggle between left and right philosophy. The fiscally conservative right, advocates free market policies. The left promotes the socialist agenda of ‘government knows best’ politics. Government should do what it was intended to do, for example, secure our borders, enforce constitutional law and limit intrusion in business and personal affairs. Government should not implement huge regulatory agencies, dictate health-care, meddle in the affairs of states, business or the individual.

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