The Brass Standard
by Thomas Sowell
by Thomas Sowell: Depending
a lot of brass. And Bill Clinton is a master politician. His rousing
speech at the Democrats' convention told the delegates that Republicans
"want to go back to the same old policies that got us into trouble
in the first place."
That is world
class brass. Bill Clinton's own administration, more than any other,
promoted an unsustainable housing boom, which eventually and inevitably
led to a housing bust that brought down the whole American economy.
the complex financial processes that reached to Wall Street and
beyond, there is one fundamental fact: many people stopped making
their mortgage payments.
Why did that
happen? Because mortgage loans were made to people who did not meet
the long-established qualification standards for getting a mortgage
loan. And why did that happen? Because the Clinton administration
threatened lawsuits against lenders who did not approve mortgage
loans to minority applicants as often as to white applicants.
In other words,
racial quotas replaced credit qualifications. A failure to have
racial statistics on mortgage approvals that fit the government's
preconceptions was equated with discrimination.
Reno said that lenders who "closely examine their lending practices
and make necessary changes to eliminate discrimination" would "fare
better in this department's stepped-up enforcement effort than those
who do not." She said: "Do not wait for the Justice Department to
of Housing and Urban Development (HUD) had similar racial quota
policies, and began taking legal actions against banks that turned
down more minority applicants than HUD thought they should.
HUD said that
it was breaking down "racial and ethnic barriers" so as to create
more "access" to home ownership. It established "goals" – political
Newspeak for quotas – for Fannie Mae and Freddie Mac to buy mortgages
that the original lenders had made to "the underserved population."
In other words, the original lenders could pass on the increasingly
risky mortgages to Fannie Mae and Freddie Mac – and, ultimately,
to the taxpayers.
agencies warned mortgage lenders against having credit standards
that these agencies considered too high. And these agencies had
many powers to use against banks and other lenders who did not heed
Reserve Bank of Boston, for example, issued guidelines for "non-discriminatory"
lending which warned lenders against "unreasonable measures of creditworthiness."
Lenders should have standards "appropriate to the economic culture
of urban lower-income and nontraditional consumers" and consider
"extenuating circumstances." In other words, when some people don't
come up to the lending standards, then the lending standards should
be brought down to them.
What was the
evidence for all the lending discrimination that the government
was supposedly trying to prevent? Statistics.
In the year
2000, for example, black applicants for conventional mortgage loans
were turned down at twice the rate for white applicants. Case closed,
as far as the media and the government were concerned. Had they
bothered to look a little deeper, they would have found that whites
were turned down at nearly twice the rate for Asian Americans.
they bothered to check out average credit scores, they would have
discovered that whites had higher average credit scores than blacks,
and Asian Americans had higher average credit scores than whites.
facts would have undermined the whole moral melodrama, reducing
it to a case of plain economics, with lenders more likely to lend
to those who were more likely to pay them back. Once lending standards
were lowered, in order to meet racial quotas, they were lowered
for everybody. Deadbeats of any race could get mortgage loans, and
most were probably not minorities.
to blame the "greed" of business, rather than the policies of government,
for problems. But lenders don't make money by lending to individuals
who don't pay them back. That is what government forced lenders
to do, beginning under the Clinton administration. And the eventual
collapse took down the economy.
It takes brass
to defy the facts. And Bill Clinton has brass.
Sowell is a senior fellow at the Hoover Institution at Stanford
University. His Web site is www.tsowell.com.
To find out more about Thomas Sowell and read features by other
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