WaPo Rewrites History

The Washington Post runs a very deceptive article today claiming that community groups warned the Federal Reserve about subprime loans and the Fed repeatedly ignored them.
In fact, the groups were complaining about the interest rate charged on the loans, not on the subsequent housing bubble. The Post writes: “Subprime mortgage lending sneaked up on the Federal Reserve.”
Not at all. The Fed knew about subprime and fully encouraged it. Here’s Greenspan quoted four years ago in, of all places, The Washington Post:

“Where once-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately,” he said in a speech. “These improvements have led to rapid growth in sub-prime mortgage lending; indeed, sub-prime mortgages account for roughly 10 percent of the number of mortgages outstanding, up from just 1 or 2 percent in the early 1990s.”

That’s not all. In June, Connie Bruck wrote in the New Yorker:

In 1992, a landmark study by the Federal Reserve Bank of Boston made it clear that there were systemic underwriting issues relating to the treatment of African American and Hispanic borrowers. Policymakers called upon the mortgage industry to change their practices and redouble their efforts to better serve minorities and underserved communities.

If the community organizers had their way, the bubble would have been far worse, and their communities would be far more disorganized.

Posted by on September 28th, 2009 at 11:23 am


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