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PAGE: Blaming the poor

By Clarence Page | Saturday, October 11, 2008

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In the storm over who is to blame for Wall Street's financial meltdown, guess who gets the biggest bum rap? Poor folks.

In a desperate attempt to deflect blame away from deregulation and other policy ideas they favor, conservatives are pointing their guns at a 1977 law that hardly anyone outside housing and banking circles cared about.

It's called the Community Reinvestment Act. It requires banks that receive federal insurance to lend within their own geographic communities.

Before laws like CRA came along, banks "redlined" entire neighborhoods, denying prospective homebuyers, most of them minorities, conventional home loans. Thanks to CRA, thousands of renters have become homebuyers. Neighborhoods have been saved. Tax revenue has increased. Urban life has improved.

But now the CRA has become a convenient scapegoat for commentators, Internet bloggers and YouTube propagandists. They want to deflect blame for the credit crash away from the more obvious culprits, like excess deregulation, lax oversight and reckless cowboy capitalism.

For example, Neil Cavuto of Fox News opined in mid-September that, if banks hadn't been forced to make loans to "minorities and risky folks," the Wall Street disaster would not have happened.

Ann Coulter blamed "affirmative action lending policies" that loaded banks up with mortgages that eventually defaulted and brought the nation's financial system to its knees.

George Will on ABC's "This Week" blamed "regulation, in effect, with legislation, which would criminalize as racism and discrimination if you didn't lend to unproductive borrowers," because "the market would not have put people into homes they could not afford."

And there's Rep. Michele Bachmann, a conservative Minnesota Republican, who caused a stir in Congress by quoting an Investor's Business Daily article accusing CRA and President Clinton of forcing banks to give out loans "on the basis of race and often little else."