The first President Bush crafted a 1989 taxpayer-funded plan to bail out the troubled savings and loan industry. As usual, Jesse Jackson jumped on the case, primarily Bush's.
The first President Bush crafted a 1989 taxpayer-funded plan to bail out the troubled savings and loan industry. As usual, Jesse Jackson jumped on the case, primarily Bush's.
Jackson spoke of "outraged" taxpayers who would be forced to pay for the "gambling and gambles of others." "Let those who had the party pay for the party," said the Rev. "It does not make sense that those who were never invited to the party should be asked to clean up the mess."
I hate when this happens — and it doesn't often — but Jesse Jackson was right. Some in the industry had cooked the books, made irresponsible loans, bought members of Congress to do their bidding, and in general acted like the thieves they were. Certainly there were other factors in the thrift crisis, including an increase of insurance up to $100,000 per depositor guaranteed by the government, but the bottom line is many middle- and upper-income people were subsidized by folks living in more reduced circumstances.
They shouldn't have been required to clean up the mess. And they shouldn't be required to clean up the mess resulting from the current home loan foreclosure predicament.
Yet now Jesse Jackson demands Washington do something about what he terms an economic tsunami. "Our government has an obligation, not only to borrowers but to the economy itself," he claims.
Obviously, politicians are entitled to change their minds; just ask Mitt Romney. Reverend Jackson, we recall, has been a politician for a long time. Twenty years ago, polls of Democratic voters showed he was their favorite for the party's 1988 presidential nomination.
Jesse Jackson and other liberals don't admit to their involvement in creating the existing situation. It was they who for many years insisted that lending institutions loosen their customary requirements. The idea was to make loans to individuals who otherwise wouldn't qualify for them.
In the golden years of Jimmy Carter, the Community Reinvestment Act (CRA) was enacted. The CRA requires the government to consider a bank's record of loaning money to low-income neighborhoods and people with shaky credit histories when deciding whether to approve a bank's effort to expand or relocate.
Liberal pressure organizations, identifying themselves as "community groups," often profit by serving as intermediaries between the lenders and loan applicants. If a community group lodges a protest against a lender for not meeting its needs, any plans for bank expansion can be denied by the government.
When former Senator Phil Gramm (R-TX) suggested in the late 90s that community groups used the CRA to extort money from banks and saving and loans, the Clinton administration objected. Clinton signaled he'd veto any legislation that might impair this vital program.
That was to be expected. As a candidate, he pledged to strengthen the CRA to prevent lending institutions from refusing loans in poor neighborhoods. As president, he "wanted the law to encourage banks to take more lending risks on low-income families," according to the Associated Press.
Those lending risks have come home to roost. Not that it's the fault of the people who took out subprime mortgages they can no longer afford. No, Barack Obama blames unscrupulous lenders. Christopher Dodd, chairman of the Senate banking, housing and urban affairs committee, faults predatory lenders. Hillary Clinton calls for a 90-day moratorium on foreclosures, a five-year freeze on interest rates on adjustable mortgages, and $5 billion to help hard hit communities and provide financial counseling. Oh, yes, financial counseling will do the trick.
Jesse Jackson told Dodd's committee in February that Congress must pass "strong laws to protect the vulnerable." In case you don't know who the vulnerable are, Chairman Dodd identified them as minorities, immigrants, the elderly and, you gotta love it, "the unsophisticated." Other than the last category, this seems like profiling to me.
The notion that it is government's responsibility to protect people from themselves never fades. But is it? Everyday we make decisions that affect our economic future. Should government defend all of us from the bad decisions we've made?
In a free society, people usually can make their own choices. The necessary corollary to this is that they accept the consequences of those choices.
Some lenders and some borrowers made bad choices. It doesn't make sense to expect others to clean up the mess, as Jesse Jackson correctly observed during the savings and loan crisis. Now he's using that bailout, which he opposed, as a justification for another one.
Notes: This Michael Bates column appeared in the December 13, 2007 Reporter Newspapers.
Biography - Mike Bates
Mike Bates wrote a weekly column of opinion - or nonsense, depending on your viewpoint - for over 20 years. Additionally, his articles have appeared in the Congressional Record, the Chicago Tribune, the Chicago Sun-Times and the Mensa Journal. He has been a guest on Milt Rosenberg's program on WGN Radio Chicago, the Bruce Elliott show on Baltimore's WBAL, the Jim Sumpter show on the USA Radio Network and the New Media Journal's Blog Radio. As a lad, Mike distributed Goldwater campaign literature and since then has steadily moved further to the Right. He is the author of "Right Angles and Other Obstinate Truths." In 2007, he won an Illinois Press Association award for Original Column
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