Correcting the record

Watching the debate last night redlined my Rant-O-Meter yet again, and there were so many half-truths and outright lies spewing from McCain's rubbery lips that it would be akin to Factology Whack-A-Mole trying to correct them all.

However.

I just wanted to be sure that we're all clear on one big lie McCain tried to push, and he said it in passing so that it wasn't even the main point of the larger lie he was telling. Which was that Freddie Mac and Fannie Mae were the cause of the current crisis. No, no, and oh hay-ell no.

Daniel Gross says it so I don't have to:

These arguments are generally made by people who read the editorial page of the Wall Street Journal and ignore the rest of the paper—economic know-nothings whose opinions are informed mostly by ideology and, occasionally, by prejudice. Let's be honest. Fannie and Freddie, which didn't make subprime loans but did buy subprime loans made by others, were part of the problem. Poor Congressional oversight was part of the problem. Banks that sought to meet CRA requirements by indiscriminately doling out loans to minorities may have been part of the problem. But none of these issues is the cause of the problem. Not by a long shot. From the beginning, subprime has been a symptom, not a cause. And the notion that the Community Reinvestment Act is somehow responsible for poor lending decisions is absurd.[...]

The Community Reinvestment Act applies to depository banks. But many of the institutions that spurred the massive growth of the subprime market weren't regulated banks. They were outfits such as Argent and American Home Mortgage, which were generally not regulated by the Federal Reserve or other entities that monitored compliance with CRA. These institutions worked hand in glove with Bear Stearns and Lehman Brothers, entities to which the CRA likewise didn't apply. There's much more. As Barry Ritholtz notes in this fine rant, the CRA didn't force mortgage companies to offer loans for no money down, or to throw underwriting standards out the window, or to encourage mortgage brokers to aggressively seek out new markets. Nor did the CRA force the credit-rating agencies to slap high-grade ratings on packages of subprime debt.[...]

Lending money to poor people and minorities isn't inherently risky. There's plenty of evidence that in fact it's not that risky at all. That's what we've learned from several decades of microlending programs, at home and abroad, with their very high repayment rates. And as the New York Times recently reported, Nehemiah Homes, a long-running initiative to build homes and sell them to the working poor in subprime areas of New York's outer boroughs, has a repayment rate that lenders in Greenwich, Conn., would envy. In 27 years, there have been fewer than 10 defaults on the project's 3,900 homes. That's a rate of 0.25 percent.

On the other hand, lending money recklessly to obscenely rich white guys, such as Richard Fuld of Lehman Bros. or Jimmy Cayne of Bear Stearns, can be really risky. In fact, it's even more risky, since they have a lot more borrowing capacity. And here, again, it's difficult to imagine how Jimmy Carter could be responsible for the supremely poor decision-making seen in the financial system. I await the Krauthammer column in which he points out the specific provision of the Community Reinvestment Act that forced Bear Stearns to run with an absurd leverage ratio of 33 to 1, which instructed Bear Stearns hedge-fund managers to blow up hundreds of millions of their clients' money, and that required its septuagenarian CEO to play bridge while his company ran into trouble. Perhaps Neil Cavuto knows which CRA clause required Lehman Bros. to borrow hundreds of billions of dollars in short-term debt in the capital markets and then buy tens of billions of dollars of commercial real estate at the top of the market. I can't find it.[...]

Lending money to poor people doesn't make you poor. Lending money poorly to rich people does.

This wasn't the worst or biggest lie McCain told during that debate. But it's exactly the kind of thing that because it was of just middling error in comparison, infiltrates the public conversation as fact and the next thing you know, it becomes accepted as common knowledge, like the myth that Al Gore claimed to have invented the internet. Once it becomes entrenched like that, it's impossible to budge.



[Also? The fucking "That one" comment?? Holy hopping fuck on a goldfish fucking cracker does that make me want to kick some shriveled old man ass every time I see it replayed. I am still boggled that he actually said it. DIAF you racist patronizing asshole.]