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Friday, September 7, 2012
Jerome Corsi's Revisionist History of Financial Crisis
Topic: WorldNetDaily

Jerome Corsi serves up a factually dubious account of the financial crisis in a Sept. 4 WorldNetDaily article:

In the current narrative presented by Democratic Party operatives, the banking industry collapse of September 2008 was caused by tax cuts under George W. Bush and supply-side economics tracing back to the era of Ronald Reagan.

The narrative, however, ignores the personal responsibility Barack Obama and Democratic Party operatives played in creating the subprime mortgage market, beginning with the passage of the Community Reinvestment Act of 1977.

In fact, financial experts agree that the CRA "was not a significant factor in subprime lending or the crisis" -- the subprime crisis was mostly driven by mortgage lenders who were not subject to the CRA.

Corsi also misleads about what the CRA does:

The Community Reinvestment Act, or CRA, was signed into law by President Jimmy Carter in 1977 with the goal of forcing banks to provide credit to businesses and homeowners with poor credit.

The CRA’s purpose was to stop banks from “red-lining,” or refusing to lend to people in low-income areas because the risk of the loan not being repaid was too high.

Even though lending to people with poor credit is inherently risky, the Carter administration was intent on forcing banks to accept a social responsibility to provide credit to homeowners and businesses in low-income neighborhoods.

In fact, redlining was the practics of denying, or charging more for, banking services in certain neighborhoods due to their racial makeup, not because of the actual riskiness of the loan. Ellen Seidman, who headed the Office of Thrift Supervision in the late 1990s, points out that the CRA does not either encourage or condone bad lending; further, CRA enforcement became a lower priority in the early 2000s, around the time that CRA-covered entities wandered deeper into "higher priced loans."

A study by the Federal Reserve Bank of Kansas City found the following:

Nearly all institutions, including those with more profitable programs, loosened their credit standards on CRA loans relative to standards on their conventional loans. These institutions did so without appreciable increases in loan losses. Further, nearly all indicated that credit risk on CRA loans is manageable.

Corsi even gets his facts wrong about a notable lending-discrimination case:

Obama himself played a role as an activist lawyer in Chicago, representing ACORN in the 1994 case Buycks-Roberson v. Citibank Federal Savings Bank. In the case, ACORN pressed Citibank to make more loans to marginally qualified African-American applicants “in a race neutral way.”

Corsi is selectively quoting the ruling to mislead about what it did -- and it wasn't about making "more loans to marginally qualified African-American applicants." The full quote from the Civil Rights Litigation Clearinghouse item on the case Corsi links to:

The parties settled the case on May 12, 1998, with an agreement that provided for waiver of some fees for class members, should they reapply for a loan, and also for various procedures to ensure that Citibank followed its own loan policies in a race neutral way.

Unless Corsi is saying that it was Citibank's longstanding policy to issue loans to "marginally qualified" non-white people, he's lying about what the lawsuit accomplished.

Which means that Corsi has demonstrated that he can lie about more than birther conspiracies. Of course, Corsi's been lying about this for years.

Posted by Terry K. at 12:05 AM EDT
Updated: Friday, September 7, 2012 12:07 AM EDT

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