Roger’s Rules

Damned if you do, damned if you don't: banking in the age of Obama

This is rich: a headline from our former paper of record:

U.S. Is Set to Sue a Dozen Big Banks Over Mortgages

Yes, that’s right: the Feds are casting a beady eye upon Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, “among others,” accusing them of “misrepresenting the quality of mortgage securities they assembled and sold at the height of the housing bubble.”

Really? Do you think so? The Feds have their knickers in a twist at the thought that these banks might have “failed to perform the due diligence required under securities law and missed evidence that borrowers’ incomes were inflated or falsified.”

You know what? I’ll bet you a nickel some banks did just that. And do you know why? Because Barney Frank (speaking of twisted knickers) told them they had to. Not Barney personally, perhaps. But agencies he spoke for, Fannie Mae & Freddie Mac, and the whole Community Reinvestment Act Swindle (CRAS for short).

Remember CRAS? I’ve written about this government property-expropriation program before in this space (e.g., here): the relevant datum in the context of the Feds’s search for a scapegoat is the fact that the program required banks to make risky loans. The buzz word was “affordable mortgages.” What it meant was “irresponsible lending, especially to favored ethnic groups.” We want the layabouts in the bad part of town to partake of “the American dream” of home ownership. They won’t work and save the requisite money, or live prudently enough to earn a good credit rating, so the government twists the rules and forces lenders to close their eyes and proffer the cash.

Mene mene tekel upharsin: the writing was on the wall a long time ago. More than a decade ago, in 2000, Howard Husock wrote this in City Journal: “Bank examiners would use federal home-loan data, broken down by neighborhood, income group, and race, to rate banks on performance. There would be no more A’s for effort. Only results—specific loans, specific levels of service—would count.” My emphasis. Make the loan or get fined.

And guess who was part of the enforcement squad? Yep. The chap known to one part of the population as President Downgrade, to another part as President Holiday: the White House golf champ: Mr. Zero-Job-Growth: the Alfred E. Neuman of Pennsylvania Avenue, Barack H. Obama — and no, mes amis, you who were just about to whine: “Don’t say Hussein! I hate it when you say ‘Barack Hussein Obama’ ” — I do not mean “Hussein” when I write “H.,” I mean “Hoover” as in Herbert Hoover, he of the last Depression. It was he — the imitation Jimmy Carter, but without the finese, or the patriotism — it was Barack Obama, then lawyer Obama, who sued Citibank on behalf of a client who charged that the bank “systematically denied mortgages to African-American applicants and others from minority neighborhoods.”

That was back when suing banks for properly adjudicating risk yielded political capital. Now what Obama needs is a distraction from the consequences of his staggeringly incompetent economic policies. So the banks he once sued for not making irresponsible loans he is now suing for getting with the program and handing out the cash — more than a $1 trillion of the stuff — to anyone who fit the profile.

It’s disgusting. It’s business as usual in Washington. And it’s the reason for the success tea party. There are a lot of people in Washington who should be polishing their resumes. Come November 2012, they’re going to have to find someone else to fleece.

Meanwhile, take a stroll down to your local bank. Look around. One of the little signs you’ll see posted is a notice informing you that the bank abides by the Community Reinvestment Act Swindle (also known as CRAP). It’s still in force, it’s just not talked about quite so much, now that the Feds are suing banks for making loans instead of refusing to make them.