Posted by: New Class Traitor | March 2, 2011

Using the Oscars to rewrite the history of the subprime crisis

Zombie writes at length on this year’s Oscar winner for best documentary:

Whenever I visit Berkeley — in particular certain upscale areas populated by academics and wealthy intellectuals — practically everyone I see has this creepy look on his or her face. […] In an instant, the Berkeley expression communicates to everyone in the vicinity, “Isn’t it great that you and I and all of us here are morally superior to the rest of the world?” […]

Charles Ferguson’s[…]  winning documentary was called Inside Job, which traces the history of the financial meltdown of 2008, and places the blame entirely on greedy Wall Street insiders who scammed the world out of trillions of dollars. Every year, the Academy voters feel compelled to make some kind of political statement with an Oscar, and this year they chose Inside Job as their statement. Predictable.

I had pretty much already forgotten about the Oscars when I opened my morning paper yesterday to discover an explanation for Charles Ferguson’s instantly identifiable facial expression — he really is from Berkeley!

At first I simply found it amusing that one can pinpoint someone’s hometown simply by their smug expression — just as Sherlock Holmes could identify the village you came from by the color of the mud splatters on your trouser cuffs — but as I continued to read the article, my mood took a decidedly political turn when I encountered this passage:

Robert Gnaizda, former president of Berkeley’s Greenlining Institute, says some of the responsibility lies with the current White House.

“There’s an unwillingness by the Obama administration to effectively criticize ‘too big to fail’ institutions,” said Gnaizda, who is featured in the documentary vainly warning successive Federal Reserve Board chairmen about the kind of doomed-to-fail loans Countrywide Financial and others were making.

Whoa whoa whoa — stop right there. Am I reading this correctly? The head of the Greenlining Institute is in the film warning against subprime loans???

As it happens, Zombie had written an essay in September 2008 on the role that the Greenlining Institute (which really ought to be called the “redlining institute”) had in creating the subprime crisis:

This short post not only posits the exact opposite theory than does Inside Job, but it actually points the finger of blame at Robert Gnaizda’s Greenlining Institute as the ultimate cause of the problem, rather than as the heroes who tried to prevent the crisis.I know I’m tilting at windmills here: the budget of my original post was exactly $0, and I’m up against an Academy-Award-winning film with a production budget of $2 million and which took over two years to complete. Furthermore, the narrative pushed by the film is the narrative favored and relentlessly affirmed by almost the entire media and all of academia, and it is therefore the narrative that the general public has come to accept.

But upon re-reading my own post (which even I had half-forgotten about), I was amazed at how still current it remains, and how the points I made two and half years ago seem to have had been written to specifically rebut the thesis of Inside Job, a film which hadn’t even been made yet.

Rather than paraphrase my earlier essay, I’ll just quote part of it here and let you judge for yourself:

…The Greenlining Institute existed solely to bully banks and financial institutions into giving loans to otherwise unqualified minority borrowers.

There’s been a lot of finger-pointing on all sides about this financial crisis, but much of it misses the point. The off-topic details about CEO salaries and bond markets and mergers and bailouts and who voted for what all chase the horse after it’s already left the barn. The key question is this:

Once upon a time, banks only loaned money to individuals who could qualify for a home mortgage; and then sometime recently, they changed their practices and started loaning money to a lot of people who didn’t qualify and could not afford to pay back the loans. And when they started defaulting, and when real estate values starting dropping, the entire industry collapsed, because there was no equity to pay back the loans. The banks lost money, the customers lost money, and it all went down the toilet. Which, of course, many people had predicted. So the question is: Why? Why did banks start making countless risky untenable loans to unqualified customers?

And the answer is: Because they were afraid of being called racists by the legal bullies at the Greenlining Institute and other similar “community organizers.”

It all started with The Community Reinvestment Act, a federal law originally passed during the Carter administration and then ramped up during the Clinton years, that was originally designed to prevent racist lending practices by banks who wouldn’t loan money to minorities, even if they were qualified. Which was a fine idea. But over time the law was twisted to force banks to make loans to minorities even if they weren’t qualified — which all may sound very peachy keen in Fantasy Utopia Land but which inevitably spells long-term financial suicide for a bank.

The Greenlining Institute’s self-appointed role is to identify those banks which by Greenlining’s reckoning haven’t doled out enough money to underqualified minority borrowers, and then threaten them with lawsuits, protests, and accusations of institutional racism if the banks don’t start opening their wallets ASAP. And the banks caved. Greenlining brags that they have unparalleled access to banking boardrooms, and they successfully squeezed $2.4 trillion (yes, trillion) in “CRA commitments” (i.e. loans to unqualified borrowers) out of terrified banks. Nearly every bank and financial institution you’ve ever heard of seems to kowtow to Greenlining.

[…G]roups like the Greenlining Institute saw the banks as potential agents of economic restructuring: If banks could be forced to grant homeownership to poor people, then that would be the first step for the lower classes to climb out of poverty, since everyone knows that owning one’s own home instills a sense of pride, self-worth, and self-reliance.And so, using the bullying tactics described above (and in the original article which first inspired my post), the Greenlining Institute (and similar groups) twisted the banks’ arms to make risky loans, for the purpose of “social justice,” to use the activists’ own terminology.

A then-young community organizer named Barack Hussein 0bama also features in the narrative.

Forced into this situation, the banks then went to great lengths to disguise the risk they had foolishly assumed; to fob the bad loans off on unsuspecting other investors, they devised convoluted financial instruments that obscured the danger of the investments; and so on.

At this point, the sorry mess developed a momentum of its own, as subprime mortgages became available to everybody (not just the targeted group) and house-flipping became a national hobby. Read the whole thing. And weep.  In related news,

The unfunded liabilities of Social Security, Medicare and Medicaid already exceed $106 trillion. That’s well over $300,000 for every man, woman and child in America (and exceeds the combined value of every U.S. bank account, stock certificate, building and piece of personal or public property).

A funeral dirge for eyes gone blind“.

Incidentally, one of the contenders “Inside Job” beat out was “Waiting for Superman” about the dysfunctional public education system. It was made by the director of “An Inconvenient Truth” but, unlike the crockumentary of that name, actually tells exactly that.  The moviemaker set out to document everything every liberal likes to believe about public schools, found the reality rather… different, and, surprisingly, had the guts to kick against some left-wing houses of the holy. (Education, in the old-fashioned sense of the word, is one cause in which some New Class liberals believe sufficiently strongly that they sometimes find themselves on the same side as conservatives.) Of course, the bien-pensant Anointed “cannot have that”…

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