Saturday, September 27, 2008

Is Neil Cavuto racist?

The Left is accusing Neil Cavuto of racism for asserting that "pushing for more minority lending" contributed to the mortgage meltdown. Here's the clip from Sept. 18:

Isaiah Poole at Firedoglake:
The assertion that a $700 billion Wall Street bailout became necessary, even in part, because financial institutions were catering to black people is deeply offensive and profoundly false. Yet it is not just the blather of an insensitive, right-wing cable talk host. It is part of a systematic campaign on the part of the right and the financial services industry to get out from under one of the few laws on the books that addresses discrimination in lending.
Look, there is no question at all -- none whatsoever -- that the current crisis was caused by subprime lending. What is "subprime lending"? Loans to people rated as higher credit risks. (People with good credit are rated "prime," thus "subprime" to denote loans to riskier clients.)

The 1977 Community Reinvestment Act, whose purpose was to abolish "redlining" and thereby to make credit more available to minorities, was hijacked by the Clinton administration, which pressured banks to increase their share of loans to minorities without regard to credit risk. That is to say, the feds didn't care what the default rates were, so long as the banks were making more loans to minorities. Economist Jim Haughey wrote in February:
To generate more mortgage paper and hence more commissions, mortgage brokers and banks progressively lowered underwriting standards with the tacit approval of CRA auditors and community groups. This spawned no downpayment and no income documentation loans. It was sufficient that an applicant with a poor credit record and income too low or too insecure was taking a credit counseling course.
Stephen Schwarzman explained last week how the policy that began under Clinton actually expanded under the Bush administration:
It started with Congress encouraging lending to lower-income people. You went from subprime loans being 2% of total loans in 2002 to 30% of total loans in 2006. That kind of enormous increase swept into the net people who shouldn’t have been borrowing.
This is not some recent, radical, racist accusation. This has been explained by Investors Business Daily. As early as 2000, Howard Husock warned about the potential problems in City Journal.

Contrary to Isaiah Poole's assertion that this was entirely about "financial institutions catering to black people," in fact many areas with the highest mortage default rates are in areas with large Hispanic populations.

Why does this matter? Why even discuss it? Because the Left wants to blame the crisis on greedy capitalists and evil Republicans, and to ensure the continuation of the same policies that caused the this crisis. But the lending market can't recover if lenders aren't required to judge credit-worthiness by neutral, objective financial standards. It was the abandonment of those standards due to CRA that is at the root of this problem, and accusing Neil Cavuto of racism won't solve the problem.

UPDATE: Guess the Left can go ahead and add House Minority Leader John Boehner to their list of racists:
[T]he American people are taking note of a left-wing giveaway Democrats are pushing to force taxpayers to bankroll a slush fund for a discredited ally of the Democratic Party. . . . Democrats want to first reward their radical allies at ACORN for their help – often illegal help – in getting Democrats elected to office.
If you oppose giving money to ACORN so they can commit more vote fraud for Democrats, you're a racist.

UPDATE II: Let me address an argument by our friendly liberal commenter Young 4-Eyes, who says that Cavuto has branded all minorities high credit risks. Cavuto is a TV host, trying to address in abbreviated form what is admittedly a complex problem.

People with good credit ratings didn't need any special programs or policies to qualify for home loans, and these people -- whether white, black, Hispanic, Asian or whatever -- were not subprime borrowers targeted by the CRA-on-steroids policies aimed at increasing minority homeownership.

Homeowners who continue to make their mortgage payments are not the problem, whatever their ethnicity. But in an eagerness increase minority homeownership, federal policies encouraged or allowed lending institutions to overlook bad credit ratings of minority mortgage applicants, creating a distinct class of minority homeowners whose subprime mortgages went into default. Since they were supposedly backed by the quasi-government agencies Freddie Mac and Fannie Mae, these bad mortgages were re-sold to financial institutions as AAA-rated securities.

For Cavuto to shorthand this is natural to the TV medium, which is not suited for complex essays. But no one is asserting, or could assert, that all minority borrowers are bad credit risks. What is asserted is that federal policy promoted lending to minorities (and whites, for that matter) with bad credit histories, and that the predictable default of these loans is at the root of the current crisis.

9/26: Arnold Kling on the bailout
9/26: Ace going soft on Paulson plan?
9/26: ACORN bailout?
9/26: What caused the crisis?
9/26: No bailout, no debate?
9/25: Porking up the bailout bill
9/18: How Clinton caused the current crisis
9/17: Feeling the pain he helped cause
9/16: Jamie Gorelick & Fannie Mae


  1. I was wondering who was going to step up and take the first volley. Anyone who has any understanding of the situation knows that we got here by irresponsible, politically-motivated lending and not "predatory" lending.

    It was also obvious that anything other than the most peripheral and euphemistic description of the problem would lead to accusations of racism.

    Perhaps after the initial furor, a serious discussion of the issues can begin.

  2. "If you oppose giving money to ACORN so they can commit more vote fraud for Democrats, you're a racist."

    Dang it, quit calling me that.

  3. OK. Let me explain something.
    The reason this walks that fine line that is racism is because under Cavuto's premise, minorities are ALL
    branded " high credit risks".It becomes an exclusively black, hispanic, asian,etc.problem.Get it?
    The way the argument is framed leaves no room for the other factors that contributed to the problem.
    If you follow Neil's train of thought,the obvious solution is that
    minorities be denied home loans, right? I mean, if lending to minorities is the problem then why not just deny them all loan applications?? Or better yet how about a Whites Only loan system?
    Trying to scapegoat all minorities as " high credit risks" is patently "racist" because there is no empirical data to suggest it is so.Are there no Caucasian " high credit risks" out there?What about "flippers" and speculators? Neil's is an argument solely based on a racial component.
    Minorities=high credit risks.
    racial link syntax...


  4. Please never, ever change, young 4-eyes. The UCG* you provide is delightful!

    *Unintentional Comedy Gold

  5. To our progg betters, transferring wealth and crashing the economy are not bugs, they are features.


  6. You can't be serious. So the potential downfall of the economy is the fault of . . wait for it. . . Black people!

    True, loans in or near default lie at the foundation of this problem. However, these borrowers include real estate speculators, both individual and corporate, who over-extended themselves while attempting to make a profit.

    Further, if you do some simple math starting with the number of Blacks in the U.S. and their respective rate of home ownership, you will understand that they are not responsible for the bulk of this problem. It's not mathematically possible.

    On top of this, Wall Street's use of derivatives to double and triple their bets was the rocket fuel thrown on a house fire that ended up burning down an entire block.

    As for Cavuto, let me be clear on this point: I'm not calling him a racist. However, to frame the root cause of this as "loans to minorities" is a cheap shot and he's smart enough to know it.

  7. So... I bought my house last March. I've got a 30-year fixed rate loan at a major bank, and I have very good credit...and I'm Black. Why does Cavuto think that lending to a black software developer with a strong income and credit rating is a problem?

    Cavuto bases his idea of what blacks are like on stereotypes. Fact is that there are loads of us who are highly-educated, well-paid, and financially secure. If he thinks that loaning to us is a problem, then he is a racist.

  8. For Cavuto to shorthand this is natural to the TV medium, which is not suited for complex essays. But no one is asserting, or could assert, that all minority borrowers are bad credit risks.

    Bravo! Sock it to him! Doubtless, Cavuto meant to leave out asians but "shorthanded" it to all minorities. But TV isn't really suited, as you assert, to trying to get to the truth of the matter (like the fact that, uh, 80% of subprimes were issued by financial institutions NOT regulated by the CRA).

    But who needs facts? It's plainly those pesky-yet-strangely-powerful minorities who victimized this country's naive, trusting financial institutions and brought them to their knees.