Irresponsible Mortgage Lending: Controlling the Narrative

Andrew Cuomo, now the Attorney General of New York, is prosecuting Bank of America for fraud in connection with the financial panic and recession. But he helped set banks up for failure in an earlier job as Secretary of Housing and Urban Development under Bill Clinton.

It isn't entirely clear to me who deserves more blame: government officials pressuring the private sector into making it easy for people with poor credit to buy houses or Wall Street hot shots getting fancy with "monetary instruments" to bundle risky loans with others. With these fancy arrangements, banks would feel more comfortable complying with government pressure to loan to "underprivileged communities". Banks really got into the spirit of things eventually, making insane loans like the one for the home next to us, bigger than ours, sold to two nice young agricultural field workers (at least one here illegally, the other on disability). This house is now awaiting auction after foreclosure, last we heard.

This crisis developed largely because many people, at all levels of society and even outside the country, were eager to take advantage of promises inherent in the myth that we would have both perpetually increasing home values and home ownership available for all. So there is plenty of blame to go around. But the myth was almost totally engineered by respected Ivy League types in government and finance. We need to be careful not to assume that "education" always confers wisdom, or that "smart" equals "wise".

I do get irritated that the officers of Fannie and Freddie (often Democratic officials sent over to make some big bucks between government jobs, plus retired congressmen) received much less calumny than officers of banks without such direct government connections. Some (besides Franklin Raines) engaged in accounting practices similar to those which led to prosecution in private enterprises like Enron, in order to pad their own bonuses. Like Jim Johnson - one of three people first chosen to vet possible VPs for Candidate Obama (replaced when some of his "ethics problems" became noteworthy, though he still remained active in the campaign). Astonishing. And then there's Jamie Gorelick, part of the 9/11 commission (she should have been a witness, instead, given her substantive role in constructing the "Gorelick Wall" to limit information flow between intelligence agencies.

Canadian banks were not similarly pressured by their government (and by government-funded institutions like Freddie and Fannie) to make risky mortgage loans. Canadian banks weathered the crisis quite well.

That bane of liberal academics Jeff Goldstein writes about the ability of Cuomo and his friends to deflect attention from their own role in the financial meltdown:

Naturally, political animals like Cuomo will look for the easy target to scapegoat. The problem is when we allow them to get away with it — to, in essence, re-craft the narrative to insulate them while casting about for places to lay blame.

. . . the manufacturing of consent — of an agreed upon narrative enforced and patrolled by the group in power that society concedes to be “truthful” based on its having forged a majority consensus — is an ever-more desirous option: not only does it circumvent the need for internal logic or the objective assessment of fact in making its implied argument; but it is relatively cheap, in that it relies almost entirely on rhetoric — a commodity most easily marshaled by those in power to reinforce the status quo. . . .

. . . the facts can sometimes get in the way of telling a good story — and we can’t have something like reality nudging its nose under the Utopian tent of progressivism, can we?

Follow the links for a little bit of very interesting education involving facts.

Remember: "Consensus" is the only moral refuge for people who have become educated enough to believe that "truth" is only in the eye of the beholder.

Side Note: One thing Cuomo's disastrous term as head of HUD points out is how often major policies are now set by appointed officials rather than elected ones.