Thursday, October 21, 2010

An Obtuse & Deceptive Accounting

If a lie is repeated often enough, Republicans hope it becomes the truth.

Republicans are bringing Community Reinvestment Act (CRA) myths back from the dead. Ron Johnson, in an ever-increasingly extremely right-wing and non-sensical senatorial campaign, is claiming the CRA (passed in 1977) is responsible for our current recession.

Th Journal recently gave ink to Johnson's (and the Republican's) already debunked hypothesis. The Journal at least included some voices with a counterpoint to this unfounded CRA-caused-recession fantasy of Johnson's. But, with a title like "Johnson said the seeds of recession began with 1977 law," I think we know the message the Journal really wants readers to take away.

Yet Ned Gramlich, of the Federal Reserve, found, "Banks have made many low- and moderate-income mortgages to fulfill their CRA obligations, they have found fault rates pleasantly low, and they generally charge low mortgage rates. Thirty years later, CRA has become very good business." Russel Kroszner, also of the Federal Reserve, states, "Contrary to the assertions of critics, the evidence does not support the view that the CRA contributed in any substantial way to the crisis in the subprime mortgage market."

A responsible news organization would have had the studies and the numbers available to educate Johnson and squash out his ridiculous charge. Instead it's their usual he-said with a passing, milquetoast counterfactual and no real discussion or data in between. Eric Alterman and George Zornick reveal, "In the 15 most populous metropolitan areas, 84.3 percent of the subprime loans in 2006 were made by financial institutions not governed by CRA."

The Journal Sentinel even notes, in the article, "The federal law [CRA] applied only to depository institutions, not private, unregulated mortgage lenders." So, you'd think they'd then give you the number of loans issued by private lenders versus those subject to CRA. You know, some actual evidence one way or the other, proving or disproving the claim.

As Paul Krugman explained, "The Community Reinvestment Act of 1977 was irrelevant to the subprime boom, which was overwhelmingly driven by loan originators not subject to the Act."

"The CRA applies only to banks and savings institutions. It does not apply to credit unions, independent mortgage companies, or investment banks," details Ellen Seidman.

Neil Bhutta and Glenn B. Canner discovered, "The small share of subprime lending in 2005 and 2006 that can be linked to the CRA suggests it is very unlikely the CRA could have played a substantial role in the subprime crisis."

It's a scary thing when someone is so ideological as to just run with the misinformation of their party and not do the heavy lifting (the actual research). Ron Johnson is just throwing out well-worn Republican talking points and seeing what sticks, hoping to scare people into voting for him. I don't know about you, but I want a senator that actually reads the bills and makes an informed decision. I don't want someone who just goes with their gut or with the polling. And, when Johnson won't even take questions from his local newspaper, you know something is amiss.

Wisconsin deserves better. Vote Russ Feingold.

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