Good Will Hinton Interviews U.S. Congressman Hank Johnson (GA-4th)

This guy is a congressman? REALLY?! There are so many topics about which he doesn't even seem to know basic fundamentals that it's difficult for me to know where to begin my critique. I guess I'll start with the subject about which I have the most first-hand knowledge and experience -- real estate. People with A+ credit were never "scared" into the sub-prime lending market. That entire segment of the market was created, along with the shady loans often associated with it, due to pressure FROM THE GOVERNMENT for lenders to create mortgage programs for which more low-income borrowers could qualify. In 1977, Congress passed the Community Reinvestment Act which basically tied approval of depository institutions' applications for deposit facilities to an evaluation of how well they "meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods" (www.federalreserve.gov). Lending institutions that failed to pass inspection not only put the future growth of their business at risk, they faced potential charges of discriminatory lending. Add to this mix the shenanigans being pulled by FNMA and FMAC, government agencies created by Congress to finance home lending. Good idea, right? But these agencies went a giant step further and began purchasing home loans from banks and bundling hundreds of them together to secure a bond, called a mortgage-backed security which could then be resold on the open market for a substantial profit. They "competed fiercely with each other to create these bonds at the best price, paying less and less for the loans they bought from banks. Securitization became so efficient that it shaved profits in the prime market paper-thin. In response, by 2000, a market had sprouted to lend to "subprime," or higher-risk, borrowers, who could be charged more for loans" (www.washingtonpost.com). Now you start to get a better idea of why so many legitimate lenders felt mounting pressure, both legislative and fiscal, to move the bar of loan approval standards lower and lower. The government is not going to fix this problem -- they in large part created it, Democrats and Republicans alike. Congressman Johnson’s attempt at partisan finger-pointing is cowardly and disingenuous. If he and his peers want to see how the problem really can be fixed, they need to take a look at what St. Roch Church in NOLA is doing. The church buys neighborhood houses and rents them to local, low-income residents. They teach the tenants money management skills and, when they are ready, help them identify a house to purchase. The church then rebates a significant portion of the rent the tenants have paid to let them use as a down payment on the purchase of their own house. Grass roots at its best, baby! But because such efforts erode the power wielded by politicians, they will rarely, if ever, be supported by the government. Which is just as well, considering everything the government touches turns to sh- . . . well, you get the idea.
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