Major economic screwups generally don’t have immediately obvious triggers that immediately precede them (natural disasters and Islamofascists flying jetliners into buildings being obvious exceptions, of course). Often the source of the problem is wide and came long before. Often they are not seen for the trouble that they are at the time.
But sometimes they are.
Behold this article that was published in the National Review in 1993…
Assault on the mortgage lenders: in the name of racial justice, the Clintonites want the power to decide who gets a home of his own – efforts to impose regulations on banks to make loans even if applicants are not creditworthy
QUIETLY, behind the scenes, the Clinton Administration is preparing for the biggest regulatory crackdown of recent years. Attorney General Janet Reno is linking up with banking regulators and with HUD Secretary Henry Cisneros to end the supposed epidemic of discrimination against minorities in making home loans. The implications for society at large are ominous.
Here, as in affirmative-action efforts in hiring, college admissions, and the drawing of voting districts, the Washington establishment is obsessed with “disparate impact,” which it equates with racism. In the mortgage-lending area, there is ample evidence of disparate impact to feed this obsession. Data collected by the Federal Government reveal that in 1992, while 16 per cent of white applicants for mortgage loans were rejected, 36 per cent of black applicants were rejected.
…
For several years now, mortgage lenders have been discovering that education and counseling can increase the pool of potentially credit-worthy minority homebuyers. Many minority applicants are rejected because they apply for a larger mortgage than they can afford or because they have failed to clear up past delinquent loans. Under “affordable housing” programs devised without Washington’s help, lenders are finding that many rejected applicants can pass muster as early as a year after initial counseling and remedial action. The education reduces the credit risk of the borrower by making him or her a more responsible mortgage holder.
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While the article dwells on racial problems, clearly evident was the risks involved with people who should not have a mortgage suddenly getting a mortgage. The US has been a nation living on credit – rather than actual on-hand wealth – for far too long. And people have gotten used to it. I live within my means as best as I can; I pay my bills – including my credit card bill – in full every time. The only debt I have is, undurprisingly, my house. But I see people around me living materially better lives while buried in debt, including vast credit card debt… and not giving a rats ass about that debt. Why shoudl they? Debt is for tomorrow. Goodies are for today.
When this sort of thing becomes accepted and commonplace, suddenly people who do not make enough money to buy a certain kind of house will demand that they *should* be able to buy that kind of house. And when large numbers of people bitch and moan that they are being discriminated against, bet on a certain political party to come riding to the rescue, damn the expense. Or the consequences.
And that’s what the sub-prime mortage crisis was all about: lending money to people that simply would not be able to pay it back. Freakin’ INSANE.
