The injustice of ‘social justice’ 0

Rep. Darrell Issa of California has released a report that shows how Democrats in power caused the depression that has spread through the world. It demonstrates how the pursuit of ‘social justice’ can bring economic disaster. And how the worst sufferers from the break-down of the free market will be precisely those for whom the whole ill-advised policy was implemented in the first place.

Investor’s Business Daily lists the main points of the report. Here are some of them: 

• In 1995, the Clinton administration issued a National Homeownership Strategy, loosening Fannie and Freddie’s lending standards and insisting that lenders “work collaboratively to reduce homebuyer downpayment requirements.”

• The administration complained that in 1989 only 7% of mortgages had less than a 10% downpayment. By 1994, it wanted that raised to 29%.

• Reduced underwriting standards spread into the entire U.S. mortgage market to those at all income levels.

• A complete decoupling of home prices from Americans’ income fed the growth of the housing bubble as borrowers made smaller down payments and took on higher debt.

• Wall Street firms specializing “in packaging and investing in the lowest-quality tranches of mortgage-backed securities, profited hugely from the increased volume that government affordable lending policies sparked.”

• Wall Street firms, homebuilders and the GSEs used money, power and influence to block attempts at reform. Between 1998 and 2008, Fannie and Freddie spent over $176 million on lobbyists.

• In 2006, Freddie paid the largest fine in Federal Election Commission history for improperly using corporate resources to hold 85 fundraisers for congressmen, raising a total of $1.7 million.

As the Issa report points out, “the real tragedy of the government’s affordable housing policy is the impact on average Americans, particularly those of modest means. Millions of these borrowers, who were supposed to have been helped by federal affordable housing policy, have now been forced into delinquency and foreclosure, destroying their asset base, their credit, and in some cases their families.”

Posted under Commentary, Economics, United States by Jillian Becker on Sunday, July 12, 2009

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