St. Louis CofCC Blog

Jerome Corsi had an article in WND today (no link because it has too many names of sitting judges), about how many banks and other financial institutions might fall like dominoes, because sub-prime mortgages have been bought and sold as assets. Incidentally, this is why Merrill Lynch is in trouble, and its affirmative action CEO was shown the door. The trouble is, the Federal judiciary is ruling that those who purchase the accounts receivable of a mortgage only get that, and not the deed — that means that if a house is foreclosed upon, the bank that originally issued the mortgage owns the house, and gets to keep all of the proceeds of the sale of that house.

But the more fundamental issue is this — Why were so many subprime adjustable rate mortgages issued to begin with, and issued to obviously credit-unworthy borrowers? When I see a lot of stories about the subprime crunch and foreclosures on TV, I’m seeing a lot of black and brown faces. And whenever you add non-white, banks, loans and credit, you get the Community Reinvestment Act of 1977, a Federal law which, on the surface, states that banks have to meet the credit needs of the communities in which they serve, but the net effect is that banks have to engage in affirmative action in credit decisions.

So if you combine low-rate ARMs, in a low-rate climate, with the CRA, then you can see that a lot of blacks and Hispanics got approved for relatively big mortgages, when they really shouldn’t have, then used those pre-approvals against each other to bid-up the sales prices of houses to an insane amount. That kind of financial planning (for anyone) is like fitting a 15-foot tall truck under a metal bridge that has exactly 15 feet of clearance — once the temperature starts going down, and the metal contracts just enough, even if it’s only by one millimeter, that truck is stuck. Likewise, once interest rates inevitably went up from their nadirs, this would mean that ARM mortgages’ rates would go up, forcing the monthly payments upward, meaning that the borrowers couldn’t pay them in full without giving up food and utilities, meaning foreclosures.

Incidentally, this is why President Bush used to be able to gloat about the record-high rate of home “ownership” among blacks. It was all built on financial quicksand.

Verily, some of these banking and monetary problems would have happened even without the affirmative action effects of the CRA, but they’re worse than they would have been with it.

UPDATE 11/26:  Here is MSM corroboration that minorities tend to be more affected by the subprime crunch and foreclosures.