Sunday, October 5, 2008

Explaining the Economic "Crisis" and Debunking Racist Scapegoating

In a classical case of racist scapegoating, so-called conservatives are blaming "minorities" and the 1977 Community Reinvestment Act (CRA) for the recent financial crisis. The law was created to reduce redlining and and to let working-class people buy houses in lieu of living wages. Unfortunately, lenders took advantage of the situation, offering predatory adjustable rate/subprime mortgages that could not be paid. Here's an example of how the scam worked:

Siding with the predatory businesses, the conservatives allege that people of color took advantage of the law and bought houses they couldn't afford, and that this was the reason that the financial industry failed. Zenitha Prince ( explains, in detail, that the Act had nothing to do with the crisis. About 80% percent of the lender institutions (finance companies, bank subsidiaries, and thrifts) did not have to comply with CRA standards. Fifty-eight percent of the subprime loans were taken out by Whites. It wasn't government meddling, in this case, that effected the crisis; it was corporate greed. However, this won't stop propagandists from perpetuating this disinformation.

The Credit Default Swaps market faces another difficult week as hundreds of billions of dollars in Fannie Mae, Freddie Mac, and Lehman Brothers swaps go up for auction.{9F86B14D-12F4-46DD-8C9E-FB4610D8817F}&dist=hppr

60 Minutes Steve Kroft does a fair job, albeit belatedly, at explaining the incompetence and greed on Wall Street that led to the crisis.

Editor's Note: See the link to "Reverse Redlining" which explains that people of color were targeted for subprime loans even though many were eligible for conventional loans.

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