Obama can change America

As we to prepare to witness the historical inauguration of Barack Obama as the first Black person to become President of the United States, I feel good about it. I wish him well. I do not wish him well because I agree with his policies; I hope he is not successful in implementing some of the changes he wishes for our county. On some issues, I think we should be changing in the opposite direction of the direction Obama wants to take us. On other issues, I agree with Obama and hope he follows through on his campaign promises. In general, it is not his policies that have given me high hopes for Obama. I am not hoping he can change government policy but rather I am hopeful that he can change society.

America is still a society where most White people have it pretty good and most Black people do not. You do not have to tell me that there are successful African Americans and poor White people; of course there are. But, on average the typical Black person has it much worse in this country than the average White person.

Some will point out that any remnant of discrimination has been eliminated and opportunity, even preferential treatment, has been provided to Black Americans. For the most part I agree, and yet the divide between the races is undeniable.

If you are born white, you can have reasonable expectations of growing up to be successful. Even if you are born to parents of modest means, you probably know someone who has achieved success or someone in your family may have achieved success. If you are white it is reasonable to have high expectations. The chances are pretty good that the typical White child will grow up to be productive, and middle class and prestige and wealth are within grasp for those with exceptional abilities and those who apply themselves.

What can the black child realistically look forward to? Many find a reality in this: If you are a black girl you will be pregnant by the time you are sixteen and raise a child alone as a single mother, financially struggling your entire life. If you are a black boy it is worse. You will start getting into trouble with the law by the time you are a young teenager. You will drop out of school and you will end up spending part of your life in prison. You may be killed before you reach thirty. No one has to tell me it doesn’t have to be this way; I know it doesn’t, but the picture I have painted is the likely reality. If life turns out better, then you have beaten the odds.

Why is it like this? I suspect that the legacy of slavery, Jim Crow, and the Great Society are all responsible for the state of the Black community. We have witnessed the destruction of the family in the Black community; the family unit is the building block of society. And poverty can be a simple math equation. For example, a mother earning $20,000 a year with one child is living in poverty. However, a family with a father earning $30,000 and a mother earning $20,000 and raising one child are doing OK. Poverty is much more than a math equation though. The absence of the father in the home is more than the absence of that income. Young men need a role model and a strong disciplinarian to keep them from running wild. Young women need a stable male figure, representing strength and fortitude and demonstrating love.

Poverty is hopelessness. Poverty is a different set of values. Poverty is a state of mind. If poverty is not to be devastating, people need the support system of the family structure. Poverty and despair and immediate gratification and low expectations and self-destructive behavior have become part of the fabric of Black society.

I think that whatever success Obama may have as President, his greatest success may be that he can change Black society. I can only imagine the pride that many Blacks must be feeling as they see a Black man achieve the ultimate success in becoming the most influential and powerful person in the world. Certainly we have had other Black role models recently. The Bush administration featured Colin Powell and Condoleezza Rice, yet I suspect that having a Black man at the very top of the ladder can have an impact that other Blacks in lesser positions cannot have.

Due to the historical structure of society, politics and even the entertainment industry, Blacks have had few admirable role models in the publicized realm. In modern times, the Black adults that many Black kids look up to are rappers and athletes. Many of the athletes have the persona of thugs and pimps and the rappers revel in that image. I watched the movie Ray Charles the other night. I love the music of Ray Charles and really enjoyed the movie, yet Ray Charles was not an admirable person. He was a drug addict who was openly unfaithful to his wife. If you are a Black parent, is this the kind of role model you want for your kid? I know one could also say that there are plenty of Whites who would make poor role models, but it seems poor role models are abundant in the black community and people to admire are few and far between.

It seem like even the successful blacks are often crooks and thugs or tainted by scandal or associations. Here in Tennessee we had an attractive Black candidate run for Senate a few years ago named Harold Ford, Jr. There was never any serious allegation about defects in his character, yet he comes from a powerful political Black family out of Memphis that is deeply tainted by scandal and corruption. His uncle, John Ford, was a sharp-dressing, handsome, arrogant, slick politician who had numerous run-ins with the law and who had a wife but also openly had a mistress. He openly maintained two households. He was a state senator for many years and is now in prison for corruption. From Adam Clayton Powell down through the present, it seems that there is almost an expectation that Blacks who achieve political success are corrupt.

Also, many of the civil rights leaders and religious leaders such as Al Sharpton and Jesse Jackson seem more like demigods and shakedown artist rather than principled leaders. Certainly there are many, many good people pastoring Black churches across America and other Black leaders of stature, but the high profile Black leaders look like con artist.

My hope for America is that Blacks will aspire to look and act like Barack Obama and not the pimp on the corner, or the drug dealer, or the rapper, or the thug athlete. I hope that the image of the Obama household where a family consisting of two successful parents and two little girls living in a normal, loving, and supportive environment sinks into the psyche of every Black kid across America. I hope that Blacks see that they can achieve anything they put their mind to. I hope they learn to value education. I hope that speaking normal English and being responsible and working hard and studying and having aspirations is no longer considered “acting white.”

I hope there is never a hint of scandal on Obama. I was concerned about some of his Chicago relationships but I hope they were casual and that nothing more comes out to tie Obama to the corruptions of some of his past associates. If Obama has a girl friend on the side, I hope we never learn about it. I hope Obama is never caught taking money under the table. I hope he never shakes down contributors or is caught helping a corrupt crony get a contract or having a cheap affair with an intern.

I hope that Obama does not try to help the Black community by extending the dependency of the welfare state. That is the last thing the Black community needs. They do not need more dependency; they need self-sufficiency. Welfare reform was a step in the right direction and then it was abandoned and we backslid. For the last few years, for the most part, the problems of the Black community have been ignored. There are ways to expand opportunity without fostering dependency. The best thing Obama can do for the Black community is be a role model and use the bully pulpit to inspire Blacks to have greater aspirations and change the way they think. If Black kids want to grow up and be like Obama, that may be Obama’s most lasting legacy.

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Evaporated cane juice?

Nashville has finally arrived! We have a Trader Joe's. I went to Trader Joe's recently and bought some good stuff at good prices. One of the things I purchased was Sunflower Seed Butter. The ingredients in Sunflower Seed Butter are sunflower seeds, evaporated cane juice, and salt. Evaporated cane juice? Isn't that sugar?

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Dear Mike, I don't wish George W. Bush ill, I just wish him goodbye and good riddance

Dear Rod,

For the last eight years, President Bush has led our country with firm determination and a steady hand in the face of numerous challenges and crises. He restored honor and integrity to the White House and protected America from another terrorist attack.

As President and Mrs. Bush prepare to leave Washington in a few weeks to return to Texas, I know I speak for Republicans and grassroots leaders across America when I say we are all grateful for their tremendous service to our country. To show our appreciation for our Commander-in-Chief, the RNC is asking every Republican to sign an electronic card that will be presented to President Bush before he leaves office. It is the least each of us can do to show our gratitude to the leader of our country and our Party.

And if you can, Rod, I hope you will also consider giving a gift to keep our Party strong and moving forward. Your secure online contribution of $1,000, $500, $100, $50 or $25 will go a long way toward helping the RNC provide the support our Republican leaders need to fight the Democrats' liberal agenda and prepare for the vital 2009-2010 elections.

I hope you will add your name to the RNC's Thank You card to President Bush and Laura Bush today. And thank you for your continued support of our Party and our cause.

Best Wishes,

Robert M. "Mike" Duncan
Chairman, Republican National Committee

P.S. Rod, in order for your name to be included on the RNC's Thank you e-card to President and Mrs. Bush, you must reply to this e-mail by January 15th. Please click here to sign the President's Thank You card and to make a secure online gift to help strengthen our Party for the battles ahead. Thank you.


Dear Mike,

Thank you for your kind letter but I must decline the opportunity to send a donation to the RNC at this time, and I am not going to sign the e-card thanking President Bush for his service. Although I made several contributions to the McCain campaign and the RNC during the election, I am withholding future donations until I see who is elected the new chairman of the RNC. Frankly, Mike, since you represent the old guard of Bush loyalist, I will be less likely to contribute to the RNC if you are re-elected chairman.

I don’t personally know you, and you may be a good guy, but I want a clean break from the Bush years and a new beginning for the party. You see, I have been a disgruntled Republican these last few years and instead of wanting to show my appreciation to President Bush, I am sighing relief that we survived his presidency. I am certainly not celebrating that Obama is being inaugurated President, but I almost feel like celebrating that Bush is leaving office. I want to forget that Bush ever happened.

I must disagree with several things you say in your letter. First of all, you say that Bush has restored honor and integrity to the White House. I don’t quite see it that way. Sure, Bill Clinton was shady and there were allocations about questionable land deals and shake-down of contributors and association with shady characters; but, Republicans have had Jack Abramoff and other scandals, so on balance, I don’t know that Bush has a claim to any greater integrity than Clinton.

If you are referring to Bill Clinton getting a blow job in the oval office, then I always thought that was a bit overblown. I know Clinton lied about it and committed perjury and that was an embarrassment, but it didn’t put the country at risk. At most, that was a personal failing. He betrayed Hillary, not the country. Bush may have a greater claim to personal moral purity than Clinton but I would not say that Bush restored honor and integrity to the office of President. In some ways, Bush brought more dishonor to the Office. Justifying and condoning torture dishonored our nation.

Bill Clinton embarrassed us by the blow job incident; Bush embarrassed us by just being George W. Bush. I am relieved that I will not have to see anymore “Great moments in Presidential Speeches.” One of the most embarrassing times I remember about GWB is when he nominated Harriet Miers to the Supreme Court. She clearly was an unqualified person. I would have been embarrassed if our Metro Council had tried to put her on the bench as a General Sessions judge, and yet Bush wanted to put her on the Supreme Court. Bush always seemed to value loyalty over competence and if there is one word to describe his presidency it is “incompetence.”

You say that Bush has led us with “firm determination and a steady hand.” Is that just another way of saying he was bull headed and would not listen to reason? That is the way I see him.

You say that you know you speak for Republicans and grassroots leaders across America when you say we are all grateful for President Bush’s service to our country. You don’t speak for me. I am not grateful for Bush’s service. I think we would be better off if Bush had never been our president.

Don't get me wrong. I don’t hate Bush. I don’t wish him ill. Unlike many on the left, I don’t even think Bush is an evil person. But, he made some serious mistakes and shamed our nation. Maybe history will judge him more kindly than I now judge him. Two presidents who are now highly regarded, Abraham Lincoln and Franklin D. Roosevelt, committed offenses to our constitution and committed grave violation of our civil liberties and yet history treats them well, so history may treat Bush well. Who knows? We will have to wait and see.

I don’t think everything Bush did was wrong. There is much about his administration with which I agree and admire. He has some accomplishments which I think deserve praise. We can be proud of the assistance we have given Africa to fight AIDS. Bush appointed two supremely qualified solid conservatives to the Supreme Court. I generally agree with “no child left behind.” I agreed with Bush’s tax policy. There are other things that Bush tried to accomplish that were the right thing to do but he simply failed to pull them off. He tried to avert the housing crisis and rein in Fannie Mae and Freddie Mac, but the Democrats in Congress defeated his proposed reforms. Comprehensive immigration reform, social security reform, and health care reform were the correct policies to pursue, and I was with him. On comprehensive immigration reform, I think Bush was right but he was defeated because he could not get the support of his own party.

I fault Bush for expanding entitlements with the Medicare prescription drug benefit. I fault him for run-away spending and failure to use the veto. I think he failed to show leadership and must accept part of the blame for the Katrina response. Most of all, I fault him for leading us into an unnecessary war based on faulty and manipulated intelligence. I am ashamed of illegal wire-tapping, extraordinary rendition, torture, and Abu Ghraib.

I don’t want Bush to be indicted. I don’t want investigations. I want to look forward and not backward. However, I don’t want to honor George W. Bush. I want my country’s honor restored and I hope the Grand Ole Party can find its soul. I don’t wish George W. Bush ill; I just wish him good-bye and good riddance.

Sincerely,

Rod Williams

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Hey Barney Frank, Thanks for the Housing Crisis.

No doubt there were various factors at work that caused the mortgage crisis. Democrats and their friends in the media like to blame the Reagan-era deregulation and many conservative commentators wish to blame the Carter-era Community Reinvestment Act, while others point to other causes.

One undeniable factor, if not the primary factor, was the irresponsible practices of Fannie Mae and Freddy Mac. Fannie and Freddie do not make loans of course but purchase the paper of the mortgage companies that do make the loans.

In the 1990’s, encouraged by the Clinton administration as a means of advancing homeownership, Fannie Mae and Freddie Mac started buying sub prime loans. Previously there was a much smaller market for sub prime mortgages, but with Fannie and Freddie buying the paper the availability of sub prime loans skyrocketed. With time-tested lending practices out the window, these two institutions ended up controlling 90% of the secondary market for mortgages. Those within the organizations who raised objections to the irresponsible lending being encouraged by Fannie and Freddie were overruled and eased out.

Fannie and Freddy began hiring Democratic operatives as CEO’s and upper management.
At the same time, Fannie and Freddie began making huge contributors to Congress, spending millions to influence votes. While some Republicans also received financial contributions from the two institutions, most of the money went to Democrats. Top recipients of those campaign contributions were Barney Frank and Chris Dodd, the Chairmen of the Committees that should have been providing over site of the two financial giants. Barack Obama and Hillary Clinton were also among the top receipts of Fannie and Freddy campaign contributions.

Wall Street investors liked the new arrangement and the easy money. Democrats liked the votes they could garner by being the party that advanced homeownership and they liked the dependable source of campaign contributions. This was the “crony capitalism” that led to the crisis.

By the early part of this decade it became clear that Fannie and Freddie were advancing a market in risky loans. If these practices continued an economic meltdown was inevitable. In 2004 Fannie Mae was caught in an accounting scandal overstating their earning and their financial stability. Congress conducted dozens of hearing and Democrats defended Fannie Mae and denied that a problem existed. (See above video.)

Principled Republicans, let by John McCain, called for the reform of Fanny Mae and Freddy Mac and President Bush proposed a bill to tighten regulation of the institutions. (For a record of the Bush administrations efforts to rein in Fannie Mae see Just the Facts: The Administration's Unheeded Warnings About the Systemic Risk Posed by the GSEs)

The bill to tighten regulation over the Government Sponsored Enterprises (Fannie and Freddie) was introduced in Congress in January 2005 but Democrats blocked it. If one single person gets credit for blocking reform that could have averted the mortgage crisis it has to be Barney Frank. (See, Fannie Mae’s Patron Saint)

While there are other factors at play that led to the economic meltdown, the bulk of the blame must be laid at the feet of Congressional Democrats who turned a blind eye to what was going on, benefited from it, and blocked reform that could have averted it.

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Latest Polling on Engish-only

In a recent poll, thirty-seven percent of Nashvillians say they support the proposed English only charter amendment and fourty-two percent say they oppose it. The other 21 percent said, "No hablo ingles."

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Obama the Magic Negro

If you haven’t heard it yet, this is the song that is creating so much controversy. The lyrics of this parody are pretty much self-explanatory. The song takes it title from a March 2007 opinion piece in the Los Angeles Times that argued that Obama was the “magic Negro” and his candidacy helped white voters alleviate guilt over past racial injustices. This parody from Paul Shanklin was first aired on the Rush Limbaugh program. I am not offended by it. I find it humorous. Like a lot of humor, however, someone is bound to take offence. Mush of the media is characterizing the song as racist and as insulting to Barack Obama. I think it is a real stretch to label this as racist. The target of the parody is not even Obama but Al Sharpton and those who criticized Obama for being insufficiently “Black.”

Former Tennessee GOP leader Chip Saltsman, who was campaign manager for Mike Huckabee and is now a candidate for Chairman of the Republican National Committee, sent as a Christmas gift a Paul Shanklin CD to members of the RNC and other prominent people on his gift list. Among the 41 songs on the CD was this one. In my view it is just silly that this is an issue. I don’t think that giving a gift of a CD of political parodies should be reason to disqualify Saltsman for the position of RNC chairman. On the other hand, the world is not fair and the party needs a Chairman that can rebuild the party.
I am not concerned about this because I think Blacks will take offence and not support the GOP. Ninety-six percent of African Americans voted for Obama, which was an increase from the 90% who almost always vote for Democrats. The African American community is so tied to the Democratic Party that I doubt we will ever pry them loose. There are not enough Black votes in play to make a difference. My concern is that we will permanently loose those white voters who voted for the “magic Negro” if the Republican Party is perceived as tolerant of racist attitudes.

It is unfair I know and I hate that we have to succumb to political correctness, but now is not the time to stand up to the dominant political establishment and defend a conservative comedian. We have more important things on the agenda. We do not need this distraction. We need to choose our battles and now is not the time to battle extreme sensitivity and political correctness. Most people will never even hear the song to judge it for themselves; they will just hear that the Republican Party selected as their chairman someone who sent out a racist song that made fun of Obama.

If one has aspirations to be Chairman of the RNC, then one should send out tasteful paperweights that are a bust of Lincoln or maybe a brass elephant paperweight or a book of Ronald Regan quotations. Political humor is a landmine for a politician. Leave the promotion of political humor to Rush Limbaugh. The Party has enough problems without this. I am sympathetic to Saltsman, but we need to throw him under the bus and move on.

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Bush signs gay rights bill

December 24, 2008

Yesterday, Bush signed into law the Worker, Retiree and Employer Recovery Act of 2008 (WRERA), requiring employers to allow employees to roll their retirement plans over to nonspouse partners. The Human Rights Campaign hailed the bill for allowing gay couples to share benefits. (link)

Commentary

Currently if you are a married person and your employer provides you with a retirement plan with a death benefit and you die, your spouse can receive the death benefit directly deposited into an IRA in his or her name. If this rule was not in place and the surviving spouse was required to withdraw the entire benefit all at once, that would result in severe tax penalties due to early withdrawal. Also, if the surviving spouse was required to withdraw the money all at once, he or she could be bumped into a higher tax bracket.

This benefit has only been available for married people until now. The bill Bush signed into law expands this right to gay couples as long as the person with the employee benefit registers his or her partner as the beneficiary.

While extending to gay couples a benefit that married couples have, it also gives benefits to gay couples that straight people do not have. Let me explain. In my job, I often work with clients who may have multiple children together and either live together or have lived to together off-and-on but they have never gotten married. If these people had a retirement benefit like this, they could not do the same thing that now a gay couple will have the right to do. I think a better law than this one, would be a law that allows a person to pass on his or her retirement benefit to anyone he wishes without regard to familial status or special relationship or sexual orientation. I would let a son give it to his mother, or a father to his daughter or any person give it to his or her best friend. Since this is not what was in the bill however, I think Bush was correct to sign the bill into law. It addresses a real-life wrong that needed to be corrected.

While I oppose gay marriage, I think we must make accommodations to gay couples. This bill was a small step but it corrected an injustice that needed correcting. If we can address the needs of gay couples with laws such as this, then the demand for gay marriage will lessen and at the same time real problems will be resolved and injustices corrected.

I am still undecided on the issue of Civil Unions but am leaning toward acceptance of some form of it. It does not have to be called “civil unions” necessarily, although I see nothing wrong with that term. Maybe we could call this new status simply a “domestic registry.” If a union were registered, the registered couple (or more) would be eligible for a bundle of the rights now given only to married people. If a mother and her adult son wanted to be registered as a couple that would be OK by me as long as we do not call it marriage.

I am not so sure that all state sanctioned "marriage" should not be anything more than “civil unions” or a registration on a “domestic registry.” How about letting the state register the union and the church join people together in holy matrimony if that is what the couple desire and they meet that faiths requirements? Face it; marriage does not carry the same weight it used to. Many couples wait until they have their first child to get married or they live together without ever getting marriage. Marriage also is certainly not until “death do us part.” When a couple can void a marriage simply by declaring incompatibility, marriage is not such a terrible commitment or strong bond. I do think society has an interest in promoting strong families, but I am not so sure that government conferring certain benefits only on “married” couples is the vehicle for promoting strong families.

As to the politics of this issue, I am surprised that this story has not gotten more coverage. I was out of town for the holidays visiting family on the day this news occurred and I missed it. I did not read a newspaper or watch TV on that day, so I don’t know if this got much coverage or not, but I assume it did not. An Internet search does not reveal a lot of coverage by mainstream news sources covering the issue or big name commentators commenting. I read a lot blogs and chat groups and this is not big news in the blogosphere. I don’t understand it.

I do not expect liberals to say anything praiseworthy of George W. Bush, but would have thought that Bush signing a piece of pro-gay legislation would have been news. I am also very surprised that the religious right has not been all over this story. I would have expected them to nail Bush to the wall over this. Is Bush so unimportant that he is not worth criticizing? I would expect the televangelist, Focus on the Family, Phyllis Schlafly and the various pro-family organizations to be ballistic. Why are they not? I am pleased that the right has not been in an uproar over this issue. If the voice of the religious right is growing faint then I think that is a good thing for the Republican Party. I don’t think there is much benefit for Republicans to be seen as the party of gay bashing.

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Bleeding Heart Tightwads

By NICHOLAS D. KRISTOF

This holiday season is a time to examine who’s been naughty and who’s been nice, but I’m unhappy with my findings. The problem is this: We liberals are personally stingy.

Liberals show tremendous compassion in pushing for generous government spending to help the neediest people at home and abroad. Yet when it comes to individual contributions to charitable causes, liberals are cheapskates. (link)

Comment

This article sites a couple of different sources to show that conservatives are quite a bit more charitable than liberals, about 30% more charitable. Not only are they more charitable with giving money, but they volunteer more often. I am not surprised by this finding.

A few months ago several of my family members were having an email exchange and someone said something about the difference between conservatives and liberals. A very close family member commented that she tells her children that the difference between liberals and conservatives is that liberals are generous and caring and conservatives are greedy. This self-righteous attitude of moral superiority seems to be very common among liberals. It was hard not to respond but I restrained myself and did not. I am better at exercising restraint in an email exchanges than I am in person. We have had enough conflict over politics in my family that I thought it best to let this one slide.

What I wanted to say, but glad I didn't, is that the difference between conservatives and liberals is that conservatives are generous with their own money and liberals are generous with other peoples money. Since the above article was written by a good liberal, there is a chance that this close family member may come across it. I hope so.

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Caroline “you know” Kennedy For Senator

I think, you know, that this is sort of like, um, this is ah, ah, like you know, like unbelievable. If ah, if ah, um, you know, if Sarah Palin had talked like this, um, she would, you know, have been the butt of a, um, a lot of, um, brutal jokes. You Know?

This is painful to listen to. I feel embarrassment for her. Maybe, she was just having a bad day. This is the only time I have ever heard Caroline Kennedy speak so maybe this is not typical. She sounds like a young, uneducated, lower class, pothead. She comes from one of the wealthiest and most powerful families in America and she is a graduate of Radcliffe College, Harvard, and Columbia Law School. Why can she not talk? Caroline Kennedy would be hard to satirize because you could not make her sound any worse than she sounds.

I don’t really like the idea of political dynasties and inherited political positions and was hoping that when Ted is finally gone from the scene, that we would have seen the last of the Kennedys. Ted should have been such an embarrassment that the Kennedy mystique was by now tarnished forever, but apparently it is not. So, I hope they go ahead and put Caroline Kennedy in the Senate and let her be the new image of the Kennedys. It could be fun.

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Don’t Blame the Community Reinvestment Act

It has almost become conservative orthodoxy to blame the current housing crisis on the Community Reinvestment Act. The line of argument is that the housing crisis was caused by loaning money to undeserving borrowers and these loans would not have been made if not due to pressure from the government forcing lenders to make bad loans. Despite this argument having been repeated over and over, I am not buying it.

When I have read some of the columnist making this claim, I have often wondered what expertise they had to support their conclusion and what evidence they had to support their claim. I often wonder if commentators are not listening to the echo chamber and repeating each other without a firm basis for reaching their conclusion.

The CRA has been around since 1976; only in the past three years did we start seeing the massive mortgage defaults. Since 1976 we have had many years of Republican dominance of the House and Senate and we have had Presidents Ford, Reagan, Bush 41 and Bush 43. If the CRA was so bad, why have Republicans not repealed it?

I have a background in mortgage lending and have been the Director of Housing Services for a non-profit housing counseling agency since 1996. I have helped hundreds of low-income people become homeowners. The people I helped have usually gotten FHA loans and had to meet standard underwriting guidelines. The help I provided was getting them eligible for the loans. I taught them money management skills, helped them repair and improve their credit and educated them to be good consumers. They often did get down payment assistance, but otherwise met the same underwriting guidelines as everyone else who got good loans.

Below is a condensed version of a speech given by Federal Reserve Board Governor Randall S. Kroszner at the Confronting Concentrated Poverty Policy Forum of the Board of Governors of the Federal Reserve System in Washington, D.C. on December 3, 2008.

Before becoming a member of the Federal Reserve Board, Dr. Kroszner was Professor of Economics at the Graduate School of Business of the University of Chicago from 1999 to 2006. He was also Assistant Professor (1990-1994) and Associate Professor (1994-1999) at the University. Dr. Kroszner was Director of the George J. Stigler Center for the Study of the Economy and the State and editor of the Journal of Law & Economics. He was a visiting scholar at the American Enterprise Institute, a research associate at the National Bureau of Economic Research, and a director at the National Association for Business Economics. Dr. Kroszner also was a member of the Federal Economic Statistics Advisory Committee at the Bureau of Labor Statistics in the Department of Labor.

You will note that Dr. Kroszner is well credentialed including an association with AEI, a free market think tank. I think Dr. Kroszner’s evaluation is a more accurate portrayal of the roll of the CRA in the current crisis than what we are hearing from many conservative columnist.

The Community Reinvestment Act and the Recent Mortgage Crisis
By Randall S. Kroszner

Some critics of the CRA contend that by encouraging banking institutions to help meet the credit needs of lower-income borrowers and areas, the law pushed banking institutions to undertake high-risk mortgage lending. We have not yet seen empirical evidence to support these claims, nor has it been our experience in implementing the law over the past 30 years that the CRA has contributed to the erosion of safe and sound lending practices. The findings of a recent analysis of mortgage-related data by Federal Reserve staff runs counter to the charge that the CRA was at the root of, or otherwise contributed in any substantive way, to the current subprime crisis.

In the 1970s, when banking was still a local enterprise, the Congress enacted the CRA. The act required the banking regulators to encourage insured depository institutions--that is, commercial banks and thrifts--to help meet the credit needs of their entire community, including low- and moderate-income areas. The CRA does not stipulate minimum targets or goals for lending, investments, or services. Rather, the law provides incentives for financial institutions to help meet the credit needs of lower-income people and areas, consistent with safe and sound banking practices, and commensurately provides them favorable CRA consideration for those activities. By requiring regulators to make CRA performance ratings and evaluations public and to consider those ratings when reviewing applications for mergers, acquisitions, and branches, the Congress created an unusual set of incentives to promote interaction between lenders and community organizations.

Given the incentives of the CRA, bankers have pursued lines of business that had not been previously tapped by forming partnerships with community organizations and other stakeholders to identify and help meet the credit needs of underserved communities. This experimentation in lending, often combined with financial education and counseling and consideration of nontraditional measures of creditworthiness, expanded the markets for safe lending in underserved communities and demonstrated its viability; as a result, these actions attracted competition from other financial services providers, many of whom were not covered by the CRA.

In addition to providing financial services to lower-income people, banks also provide critical community development loans and investments to address affordable housing and economic development needs. These activities are particularly effective because they leverage the resources available to communities from public subsidies and tax credit programs that are targeted to lower-income people. In just the past two years, banks have reported making over $120 billion in community development loans nationwide. This figure does not capture the full extent of such lending, because smaller institutions are not required to report community development loans to their regulators.

Over the years, the Federal Reserve has prepared two reports for the Congress that provide information on the performance of lending to lower-income borrowers or neighborhoods--populations that are the focus of the CRA. These studies found that lending to lower-income individuals and communities has been nearly as profitable and performed similarly to other types of lending done by CRA-covered institutions. Thus, the long-term evidence shows that the CRA has not pushed banks into extending loans that perform out of line with their traditional businesses. Rather, the law has encouraged banks to be aware of lending opportunities in all segments of their local communities as well as to learn how to undertake such lending in a safe and sound manner.

Recently, Federal Reserve staff has undertaken more specific analysis focusing on the potential relationship between the CRA and the current subprime crisis. This analysis was performed for the purpose of assessing claims that the CRA was a principal cause of the current mortgage market difficulties. For this analysis, the staff examined lending activity covering the period that corresponds to the height of the subprime boom.

The research focused on two basic questions. First, we asked what share of originations for subprime loans is related to the CRA. The potential role of the CRA in the subprime crisis could either be large or small, depending on the answer to this question. We found that the loans that are the focus of the CRA represent a very small portion of the subprime lending market, casting considerable doubt on the potential contribution that the law could have made to the subprime mortgage crisis.

Second, we asked how CRA-related subprime loans performed relative to other loans. Once again, the potential role of the CRA could be large or small, depending on the answer to this question. We found that delinquency rates were high in all neighborhood income groups, and that CRA-related subprime loans performed in a comparable manner to other subprime loans; as such, differences in performance between CRA-related subprime lending and other subprime lending cannot lie at the root of recent market turmoil.

In analyzing the available data, we focused on two distinct metrics: loan origination activity and loan performance. With respect to the first question concerning loan originations, we wanted to know which types of lending institutions made higher-priced loans, to whom those loans were made, and in what types of neighborhoods the loans were extended. This analysis allowed us to determine what fraction of subprime lending could be related to the CRA.

Our analysis of the loan data found that about 60 percent of higher-priced loan originations went to middle- or higher-income borrowers or neighborhoods. Such borrowers are not the populations targeted by the CRA. In addition, more than 20 percent of the higher-priced loans were extended to lower-income borrowers or borrowers in lower-income areas by independent nonbank institutions--that is, institutions not covered by the CRA.

Putting together these facts provides a striking result: Only 6 percent of all the higher-priced loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas, the local geographies that are the primary focus for CRA evaluation purposes. This result undermines the assertion by critics of the potential for a substantial role for the CRA in the subprime crisis. In other words, the very small share of all higher-priced loan originations that can reasonably be attributed to the CRA makes it hard to imagine how this law could have contributed in any meaningful way to the current subprime crisis.

Of course, loan originations are only one path that banking institutions can follow to meet their CRA obligations. They can also purchase loans from lenders not covered by the CRA, and in this way encourage more of this type of lending. The data also suggest that these types of transactions have not been a significant factor in the current crisis. Specifically, less than 2 percent of the higher-priced and CRA-credit-eligible mortgage originations sold by independent mortgage companies were purchased by CRA-covered institutions.

I now want to turn to the second question concerning how CRA-related subprime lending performed relative to other types of lending. To address this issue, we looked at data on subprime and alt-A mortgage delinquencies in lower-income neighborhoods and compared them with those in middle- and higher-income neighborhoods to see how CRA-related loans performed. An overall comparison revealed that the rates for all subprime and alt-A loans delinquent 90 days or more is high regardless of neighborhood income. This result casts further doubt on the view that the CRA could have contributed in any meaningful way to the current subprime crisis.

Our analysis of the data on loan performance and the roll of the CRA revealed the following:

Some lower-income lending by institutions subject to the CRA law was outside their local communities and was unlikely to have been motivated by the CRA..
Delinquency rates for subprime and alt-A loans in neighborhoods just below the CRA-eligibility threshold are very similar to delinquency rates on loans just above the threshold, hence not the subject of CRA lending.

Most foreclosure filings have taken place in middle- or higher-income neighborhoods; in fact, foreclosure filings have increased at a faster pace in middle- or higher-income areas than in lower-income areas that are the focus of the CRA.

In conclusion, I believe the CRA is an important model for designing incentives that motivate private-sector involvement to help meet community needs. Contrary to the assertions of critics, the evidence does not support the view that the CRA contributed in any substantial way to the crisis in the subprime mortgage market.

To read the uncondensed version and see the supporting research, visit this link: http://www.federalreserve.gov/newsevents/speech/kroszner20081203a.htm

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Merry Christmas

To all my Democratic family and friends:

Please accept my best wishes for an environmentally sensitive, politically correct, socially responsible, health-conscious, gender-neutral, Merry Christmas or Happy Kwanza, or Happy Holiday or celebration of the winter solstice, practiced within the most enjoyable traditions of the religious persuasion of your choice, or secular practices of your choice. These wishes or sent to you, of course, with the utmost respect and sensitivity for the religious/secular persuasion and/or traditions of others, or their choice not to practice religious or secular traditions at all, as the case may be.

I also wish you financial success, personal fulfillment and good health in this the onset of the generally accepted calendar year 2009, but not without due respect for your sensitivities of the calendars of choice of other cultures whose contributions to society have helped make America great. Not to imply that America is necessarily greater than any other country, of course. Also in wishing you a financial success that is not to imply that you seek to acquire more that your fair share of earth’s bounty or that your financial success would be acquired at the expense of others or that you would use that financial success to engage in vulgar consumerism; I just hope you have all you need to be happy. Also, this wish is made without regard to the race, creed, color, age, physical ability, religious faith or sexual preference of the recipient of these good wishes. Gee, I hope I haven’t offended you.

To my very religious conservative friends and family:

Merry Christmas! I apologize if I sent you a secular Christmas card instead of religious card or if I inadvertently said "Happy Holidays"; and yes, I know Christ is the reason for the Christ-mas season!

To everyone else:

Merry Christmas and Happy New Year!

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An Elephant Tale

It seems that I get lots of heartwarming stories forwarded to me this time of the year. I normally do not post them or forward them, but I wanted to share this one. I hope you enjoy it as much as I did. This story has no political message and I will let you draw your own conclusion as to the moral of the story. Rod

An Elephant Tale

In 1986, Peter Davies was on holiday in Kenya after graduating from Northwestern University...
On a hike through the bush, he came across a young bull elephant standing with one leg raised in the air. The elephant seemed distressed, so Peter approached it very carefully.
He got down on one knee, inspected the elephants foot, and found a large piece of wood deeply embedded in it. As carefully and as gently as he could, Peter worked the wood out with his knife, after which the elephant gingerly put down its foot.

The elephant turned to face the man, and with a rather curious look on its face, stared at him for several tense moments. Peter stood frozen, thinking of nothing else but being trampled. Eventually the elephant trumpeted loudly, turned, and walked away. Peter never forgot that elephant or the events of that day.

Twenty years later, Peter was walking through the Chicago Zoo with his teenage son. As they approached the elephant enclosure, one of the creatures turned and walked over to near where Peter and his son Cameron were standing. The large bull elephant stared at Peter, lifted its front foot off the ground, then put it down. The elephant did that several times then trumpeted loudly, all the while staring at the man.


Remembering the encounter in 1986, Peter could not help wondering if this was the same elephant. Peter summoned up his courage, climbed over the railing, and made his way into the enclosure. He walked right up to the elephant and stared back in wonder.

The elephant trumpeted again, wrapped its trunk around one of Peter legs and slammed him against the railing, killing him instantly.

Apparently it wasn't the same elephant.

(If you would like to suggest a moral to the story or an analogy please feel free to post a reply. Rod)

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