Look at how far we’ve come!

Journal of Real Estate Portfolio Management, 2000:

Over the past quarter century, banks, borrowers, legislators, researchers and community groups have debated whether bank lending is based solely on economically rational credit considerations, or whether loan decisions are influenced by the race of the loan applicant, Though racial discrimination in bank lending may have existed in the past and may have even been encouraged by governmental underwriting guidelines that reflected the conventional wisdom of the time, several laws have been enacted to eliminate this practice. These include the Equal Credit Opportunity Act (ECOA), the Community Reinvestment Act (CRA) and the Home Mortgage Disclosure Act (HMDA). Despite the legislation, there is a widespread belief that racial discrimination in bank lending decisions persists…

Originally, redlining was not a racial issue. Complaints about redlining surfaced in the 1960s and 1970s, mostly in older, primarily in the white, ethnic neighborhoods of Chicago, Baltimore and other large cities. Community groups charged that lenders were unwilling to make conventional mortgage loans in these neighborhoods which led to a decline in housing values in subject neighborhoods (see Moore, 1987; and Hasbrouck, 1991). Declining prices led, in turn, to lender reluctance, thus precipitating a vicious cycle of community decline.

The allegations led to calls for federal legislation to improve the availability of conventional mortgages. Congress considered this problem for much of the 1970s. However, whether redlining actually existed was not clear. Nor was it clear that redlining, if it existed, was an imprudent policy. After all, the typical conventional mortgage loan was made on a long-term basis on the collateral value of the property. If the value of that property was expected to decline, such a loan involved a risk that might be inappropriate for a bank or thrift institution…

Paul Krugman, 2007:

[T]he explosion of “innovative” home lending that took place in the middle years of this decade was an unmitigated disaster…

[D]uring the bubble years, the mortgage industry lured millions of people into borrowing more than they could afford…

[Former Fed Chairman Greenspan] brushed off warnings about deceptive lending practices, including those of Edward M. Gramlich, a member of the Federal Reserve board. In Mr. Greenspan’s world, predatory lending — like attempts to sell consumers poison toys and tainted seafood — just doesn’t happen…

Given the role of conservative ideology in the mortgage disaster, it’s puzzling that Democrats haven’t been more aggressive about making the disaster an issue for the 2008 election. They should be: It’s hard to imagine a more graphic demonstration of what’s wrong with their opponents’ economic beliefs.

I sure am glad I’m not in the mortgage business. If I don’t lend to lower-income people, I’m redlining; if I do, I’m being predatory…