Outrage of the day | Nealz Nuze | www.boortz.com

By Neal Boortz

I’ve been through this routine before … I’ve gone to great lengths to explain how the Community Reinvestment Act led to our housing crisis, which led to our current economic woes. For a quick recap: The Community Reinvestment Act was based on the brilliant idea that government would require financial institutions to lend to unqualified borrowers. Knowing what you now know about how this government mandate led to our financial collapse, you should be outraged when you read this:

Holder Launches Witch Hunt Against Biased Banks

By PAUL SPERRY, INVESTOR'S BUSINESS DAILY Posted 07/08/2011 06:51 PM ET

In what could be a repeat of the easy-lending cycle that led to the housing crisis, the Justice Department has asked several banks to relax their mortgage underwriting standards and approve loans for minorities with poor credit as part of a new crackdown on alleged discrimination, according to court documents reviewed by IBD.

Prosecutions have already generated more than $20 million in loan set-asides and other subsidies from banks that have settled out of court rather than battle the federal government and risk being branded racist. An additional 60 banks are under investigation, a DOJ spokeswoman says.

No Job, No Problem

Settlements include setting aside prime-rate mortgages for low-income blacks and Hispanics with blemished credit and even counting "public assistance" as valid income in mortgage applications.

In several cases, the government has ordered bank defendants to post in all their branches and marketing materials a notice informing minority customers that they cannot be turned down for credit because they receive public aid, such as unemployment benefits, welfare payments or food stamps.

Among other remedies: favorable interest rates and down-payment assistance for minority borrowers with weak credit.

For example, the government has ordered Midwest BankCentre to set aside almost $1 million in "special financing" for residents living in predominantly black areas of St. Louis. The program includes originating conventional home loans at fixed prime rates for African-American borrowers "who would ordinarily not qualify for such rates for reasons including the lack of required credit quality, income or down payment."

The same federal order, signed last month, praises Midwest for adopting "less stringent underwriting criteria" while under investigation.

In the case against Citizens Bank of Detroit, settled in May, the U.S. decrees that "the bank may choose to apply more flexible underwriting standards in connection with the programs under this order."

Such efforts risk recreating the government-imposed lax underwriting that led to the housing boom and bust, critics fear.

"It's absolutely outrageous after what we've just gone through," said former Rep. Ernest Istook, a Heritage Foundation fellow. "How can someone both be financially stable enough to merit a mortgage at the same time they're on public assistance? By definition, you don't have the kind of employment that can support such a loan."

Justice March

Justice spokeswoman Xochitl Hinojosa said the anti-discrimination notice "does not compel the banks to make loans to people who do not qualify." She said such measures are "essential to remedy the harmful effects of the banks' conduct."


If we can take anything from our current state of economic misery, it could at least be a lesson in how not to let it happen again. But this is what you get when you have an administration that does not understand what got us here in the first place (government mandates), nor how to fix it (more government spending and mandates). Instead, this administration insists on blaming Wall Street, fat cat bankers and the evil, filthy disgusting rich who are flying around on their private jets.