Opinion> Thomas Sowell> Bankrupt Exploiters

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Bankrupt "Exploiters"

In one of those front-page editorials disguised as "news" stories, the New York Times blames "the lucrative lending practices" of banks and other financial institutions for helping create the current financial crisis of millions of borrowers and of the financial system in general.

It must take either a willful determination to believe whatever they want to believe or a cynical desire to propagandize their readers for the New York Times to call "lucrative" the lending practices that have caused many lenders to lose millions of dollars, some to lose billions and some to go bankrupt themselves.

Blaming the lenders is the party line of Congressional Democrats as well. What we need is more government regulation of lenders, they say, to protect the innocent borrowers from "predatory" lending practices.

Before going further down that road, it may be useful to look back at what got us into this mess in the first place.

It was not that many years ago when there was moral outrage ringing throughout the media because lenders were reluctant to lend in certain neighborhoods and because banks did not approve mortgage loan applications from blacks as often as they approved mortgage loan applications from whites.

All this was an opening salvo in a campaign to get Congress to pass laws forcing lenders to lend to people they would not otherwise lend to and in places where they would not otherwise put their money.

The practice of not lending in some neighborhoods was demonized as "redlining" and the fact that minority applicants were approved for mortgages only 72 percent of the time, while whites were approved 89 percent, was called "overwhelming" evidence of discrimination by the Washington Post.

Some people are more easily overwhelmed than others, especially when they find statistics that seem to fit their preconceptions. But if we do what politicians and the media seldom bother to do— stop and think— an entirely different picture emerges.

In our own personal lives, common sense leads us to avoid some neighborhoods.

If you want to call that "redlining," so be it. But places where it is dangerous to go are often also places where it is dangerous to send your money.

As for racial differences in mortgage loan application approval rates, that does not tell you much if you are comparing apples and oranges. Income, credit history and net worth are just some of the things that are very different from one group to another.

More important, in the same ways that blacks differ from whites, whites differ from Asian Americans. The fact that whites are turned down for conventional mortgage loans, and resort to subprime loans, more often than Asian Americans do is seldom reported in "news" stories about lending practices, even though such data are readily available.

Shocking as it may be to some, lenders are in the business of making money, and they don't much care whose money it is, so long as they get paid.

Politicians, on the other hand, are in the business of getting votes, and they don't much care whose votes it is— or what they have to say or do in order to get those votes.

It was government intervention in the financial markets, which is now supposed to save the situation, that created the problem in the first place.

Laws and regulations pressured lending institutions to lend to people that they were not lending to, given the economic realities. The Community Reinvestment Act forced them to lend in places where they did not want to send their money, and where neither they nor the politicians wanted to walk.

Now that this whole situation has blown up in everybody's face, the government intervention that brought on this disaster in is supposed to save the day.

Politics is largely the process of taking credit and putting the blame on others— regardless of what the facts may be. Politicians get away with this to the extent that we gullibly accept their words and look to them as political messiahs.

To find out more about Thomas Sowell and read features by other Creators Syndicate columnists and cartoonists, visit the Creators Syndicate web page at www.creators.com. Thomas Sowell is a senior fellow at the Hoover Institution, Stanford University, Stanford, CA 94305. His Web site is www.tsowell.com.

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Sir; I would not trouble you to read Marx; or any form of history for that matter. But people cannot both live and pay interest. Tell me why no one can buy a house, or any real property, often cannot buy gasoline, or food without resort to credit? Every time a man waits for a paycheck he is giving credit for free as the price of having a job. But, if he was paid enough, and if his job were worth doing, it would pay his bills. When wages are forced down, workers must pay with promises, and interest; so lending money at interest becomes one part of a situation without benefit for the working man, where to have what is necessary today he must pay far more than the commodity is worth tomorrow. And again, often with little choice. So who benefits from high interest, and how can a nation benefit if its individuals are harmed by high interest? As a whole society we have been using credit. The government uses it just as the people, and for the exact same reason, that they are starved of revenue. My government gives me a tax break on home interest. Does that do anything to ease its deficit, or to lower interest rates on home loans? Not hardly. I paid three times the price of my house to have it once, all for interest, since it is not much. In what way does that financial impediment to home ownership help the nation? It causes me to work harder, and longer; and puts me in a situation where I must endure want and denegration to keep hard a hold of what I have got. In short it makes me a slave. But multiply my situation by millions. Multiply the lost revenue to the government from me by millions. All that money is going some place, and it is not into the pockets of the working class, who, again, are forced to rely on credit to make ends meet. If no one gets ahead paying interest, some one must get ahead recieving it; or all is broke. In fact the nation, and the government are starved to make a single class rich. This is the way wealth, and political power end up owned by a fraction of the people. And another way they are starved is this: Property, which once supported the entire government has shifted its burden onto labor. Because real property is not taxed, it has become a bank of wealth. The primary cost of any real property reflects its value as a speculation. Look at the situation in Lincoln's day. Property paid all tax. Property had to pay its tax, or be put on the market. So, Property was cheap, and the price of labor was dear because labor was required to make all property pay. Now, property can be held for another day while working people pay top dollar and the government is starved of revenue. Once more, how does this situation help working people. Does it raise their wages? No. Rather, working people supporting almost all of the government find they must work once for profit, once for wages, and once for taxes. His share of all he produces dwindles, and his need to live on future income grows. Now; you know there is no more than what workers produce, or what God almighty gives to a land in value that can be taken from it. High interests, or interests paid on everything imaginable can suck all the money and value out of an economy. I don't know if Marx said it or only quoted another, but glut (depression) is synonymous with high profits. Try to blame the government, or the working people; but the problem is quite simple. We have let ourselves be ruined by interest because we could not defend ourselves together as a nation from our parasites. Thanks for defending the enemy. Sweeney

Comment: #1
Posted by: James A, Sweeney
Wed Jul 23, 2008 3:07 PM