There’s no housing crisis there is a mortgage crisis that FDR began

…redlining is at root of today’s collapse. The rule of unintended consequence is in full song.

There is no “housing crisis.” Indeed there is a mortgage crisis promulgated by rotten federal policies that bludgeoned more than willing bankers into making bad loans while rolling up and pocketing usury closing fees and the like.. Make no mistake they knew they were bad but for ten years they figured the White House wouldn’t, in fact couldn’t, let them fail.

At the root of the problem is something called “redlining.”

Ironically that practice started under the auspices of liberal icon Franklin Delano Roosevelt (1882-1945) who new President Obama worships. “Redlining” began with the National Housing Act of 1934, which established the Federal Housing Administration (FHA). The federal government contributed to the early decay of inner city neighborhoods by withholding mortgage capital and making it difficult for these neighborhoods to attract and retain families able to purchase homes.[In 1935, the Federal Home Loan Bank Board (FHLBB) asked Home Owners’ Loan Corporation (HOLC) to look at 239 cities and create “residential security maps” to indicate the level of security for real-estate investments in each surveyed city. Such maps defined many minority neighborhoods in cities as ineligible to receive financing. The maps were based on assumptions about the community, not accurate assessments of an individual’s or household’s ability to satisfy standard lending criteria. Since blacks were unwelcome in white neighborhoods, which frequently instituted racial restrictive covenants to keep them out, the policy effectively meant that blacks could not secure mortgage loans at all. The assumptions in redlining resulted in a large increase in residential racial segregation and urban decay in the United States. Urban planning historians theorize that the maps were used by private and public entities for years afterwards to deny loans to people in black communities. However, recent research has indicated that the HOLC did not redline in its own lending activities, and that the racist language reflected the bias of the private sector and experts hired to conduct the appraisals.

On the maps, the newest areas — those considered desirable for lending purposes — were outlined in blue and known as “Type A”. These were typically affluent suburbs on the outskirts of cities. “Type B” neighborhoods were considered “Still Desirable”, whereas older “Type C” were labeled “Declining” and outlined in yellow. “Type D” neighborhoods were outlined in red and were considered the most risky for mortgage support. These neighborhoods tended to be the older districts in the center of cities; often they were also black neighborhoods.

The Fair Housing Act of 1968 was passed to fight the practice. It prohibited redlining when the criteria for redlining are based on race, religion, gender, familial status, disability, or ethnic origin. The Community Reinvestment Act of 1977 further required banks to apply the same lending criteria in all communities. But, frankly not much changed.

A further irony is that the watershed moment happened in 1992 when then presidential candidate- Bill Clinton singled out ShoreBank, a community-development bank in Chicago’s South Shore neighborhood, was a part of the private-sector fight against redlining. Founded in 1973, ShoreBank sought to combat racist lending practices in Chicago’s African-American communities by providing financial services, especially mortgage loans, to local residents. Many sources characterize ShoreBank’s efforts as overwhelmingly inspirational and successful. Clinton called ShoreBank “the most important bank in America.

President Clinton set out to right what was obviously a wrong installed by the liberal FDR administration that he revered while conveniently ignoring the infamous 1934 redlining act. It is amusing that President Barrack Obama likes to compare himself with FDR who authored and sanctioned one of the vilest racist’s actions of America’s federal government in the 20^th century.

Soon after taking office Clinton began jawboning banks to end redlining practices and deputized then Attorney General Janet Reno as his enforcer. Reno made it indelibly clear that banks better lend and insurance companies’ damn well better insure.

Clinton’s cajoling had wild success among mortgage issuers as well as insurers who wouldn’t insure mortgages or houses in those redlined leper –like colonies. They lost their good business sense triggering “creative financing” and a host of mortgage loan “stocks” and all sorts of things that propped up the mess until last year when the house of cards tumbled.

It may have taken three-quarters of a century but as Reverend Jeremiah Wright so inelegantly pointed out “the chicken have come home to roost.”

The savage humor of it all is January 30, 2009 would have been FDR’s 127^th birthday. Happy birthday.