Yes, it’s true. Just ask our local News Limited opinion hard-head Andrew Bolt, who writes today that:
You see, this crash wasn’t really caused in the first case by bankers’ greed. Or not by their greed alone.
The “greed” that started it was that of poor people in the US who wanted a house and took out home mortgages they had little hope of repaying.
What helped them to get these ninja loans – loans to people with no income, no jobs and no assets – were tough rules pushed through by then-president Bill Clinton forcing banks to issue more loans to minorities, or else.
And financing and guaranteeing many of them were two semi-nationalised mortgage wholesalers, Fannie Mae and Freddie Mac, which were excused some of the tougher capital requirements of banks, so greedy was Clinton for success.
Bolt, of course, keen to absolve bankers from their responsibilities and markets from failure, sells short a whole range of factors that underwrote the crisis, such as the overleveraging of sub-prime based financial products, the anti-regulatory zeal that prospered under the reign of Greenspan, the excessive risks taken by bankers in the search for market share and new markets, and, yes, their drive to pile a bit more on those bonuses they have so craved. As Mike Steketee wrote in the Oz last week:
Defenders of the free market have gone back all the way to the Community Reinvestment Act passed in the US in 1977 to argue regulation, rather than deregulation, has created the present problem. This legislation was designed to end discrimination in lending practices against lower income neighbourhoods often suffering from urban blight. It stipulated lending be consistent with “safe and sound operations”. Although financial institutions were evaluated for compliance with the act, it never required they lose money on mortgages or that they be given to people with slim prospects of repaying them. Even if, as some claim, the legislation ultimately played a part in encouraging excesses, such as the bundling of sub-prime loans into packages that hid their riskiness, that was a failure not of too much but of too little regulation. According to congressional evidence this year from law professor and former US Treasury official Michael Barr, 50 per cent of sub-prime loans came from financial institutions not covered by the act and another 25 to 30 per cent from those only partially covered. “The worst and most widespread abuses occurred in the institutions with the least federal oversight,” Barr said.
The Bolt line has also been comprehensively debunked in that well-known left wing rag, the Wall Street Journal. But the sort of simplistic drivel pedaled by Bolt (and his stablemate Janet Albrechtsen, though at least she doesn’t ping ‘minorities’) fills sites like alt.conspiracy. And there it is being pedaled, almost cut-and-paste, by highly-paid columnists in the legitimate Australian media. Go figure.