It’s easier for the government to blame the banks than to take responsibility for their own role in the housing meltdown. CNN Money posted an article today about the settlement reached with five of the largest home loan lenders.
The article reports:
Participating banks: The five mortgage servicers that are parties to the settlement — Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500), Wells Fargo (WFC, Fortune 500) and Ally Financial — will pay a total of $5 billion to the states. Some of that money will go to foreclosed homeowners and the rest to the states.
Federal officials say negotiations are underway to expand the settlement to nine other major servicers, which would raise the overall value of the settlement to $30 billion.
I am not in any way connected to a bank (although I do use them), but this makes me totally furious. On September 28, 2008, Jeff Jacoby at Boston.com stated:
The roots of this crisis go back to the Carter administration. That was when government officials, egged on by left-wing activists, began accusing mortgage lenders of racism and “redlining” because urban blacks were being denied mortgages at a higher rate than suburban whites.
The pressure to make more loans to minorities (read: to borrowers with weak credit histories) became relentless. Congress passed the Community Reinvestment Act, empowering regulators to punish banks that failed to “meet the credit needs” of “low-income, minority, and distressed neighborhoods.” Lenders responded by loosening their underwriting standards and making increasingly shoddy loans. The two government-chartered mortgage finance firms,Fannie Mae andFreddie Mac, encouraged this “subprime” lending by authorizing ever more “flexible” criteria by which high-risk borrowers could be qualified for home loans, and then buying up the questionable mortgages that ensued.
I commend the effort to make home ownership available to more people; I object to putting pressue on banks to make bad loans. The fact that the government is now going after the banks they put at risk is the height of chutzpah. Going after the lenders they forced to make bad loans is simply another example of the anti-business attitude of the Obama Administration.