Prof. Mishra has a knack for changing the subject.
When asked about income taxes, he talked about corporate taxes. When asked about the Federal Reserve, he brought the conversation around to Glass-Steagall. When asked about the Community Reinvestment Act (CRA), his focus turned to the “government-sponsored enterprises” (GSEs): Fannie Mae and Freddie Mac.
Here’s how he did it: Continue reading “The Art of Distraction”
In 1977, Congress passed (and President Jimmy Carter signed) the Community Reinvestment Act to reduce discrimination in lending.
Specifically, many banks were ignoring creditworthy, qualified borrowers in low-income, mostly-minority neighborhoods — a practice known as “redlining.” If banks were going to accept federal deposit insurance and access to the Federal Reserve’s discount window, the least they could do was make credit available to everyone who deserved it, regardless of where they lived or what color their skin was.
The CRA empowered regulators to “encourage” banks to lend to these borrowers — if they were just as likely to repay as borrowers receiving loans in other communities. The law didn’t specify how to encourage this behavior, so it took awhile for regulators to figure out how to enforce it. Continue reading “Don’t Repeal the CRA. Expand It.”
No offense to Robert Samuelson, but I’m won’t be asking him to run the Treasury Department anytime soon.
Samuelson, a Washington Post columnist, calls Fannie Mae and Freddie Mac “economic mongrels” whose “losses stemmed from unrealistic ‘housing affordability goals’ [and] lax lending in pursuit of higher profits.” Not only is this statement factually incorrect, but nowhere in the entire op-ed does he explain why Fannie and Freddie exist in the first place. If you’re trying to criticize their policies and resolve the “question of what to do about” them, that’s kind of important.
In June 2009, I wrote one final op-ed for my most loyal readers. This one didn’t make it into the Hazleton Standard-Speaker, for which I had stopped writing a couple weeks earlier. Since there seems to be a lot of ignorance about the issues I discussed, let’s make it public: Continue reading “Don’t Ask a Journalist to Explain Real Estate Economics to You, Part II”