Thomas Sowell

The Federal Reserve Bank of Boston, for example, issued guidelines for "non-discriminatory" lending which warned lenders against "unreasonable measures of creditworthiness." Lenders should have standards "appropriate to the economic culture of urban lower-income and nontraditional consumers" and consider "extenuating circumstances." In other words, when some people don't come up to the lending standards, then the lending standards should be brought down to them.

What was the evidence for all the lending discrimination that the government was supposedly trying to prevent? Statistics.

In the year 2000, for example, black applicants for conventional mortgage loans were turned down at twice the rate for white applicants. Case closed, as far as the media and the government were concerned. Had they bothered to look a little deeper, they would have found that whites were turned down at nearly twice the rate for Asian Americans.

Had they bothered to check out average credit scores, they would have discovered that whites had higher average credit scores than blacks, and Asian Americans had higher average credit scores than whites.

Such inconvenient facts would have undermined the whole moral melodrama, reducing it to a case of plain economics, with lenders more likely to lend to those who were more likely to pay them back. Once lending standards were lowered, in order to meet racial quotas, they were lowered for everybody. Deadbeats of any race could get mortgage loans, and most were probably not minorities.

Democrats like to blame the "greed" of business, rather than the policies of government, for problems. But lenders don't make money by lending to individuals who don't pay them back. That is what government forced lenders to do, beginning under the Clinton administration. And the eventual collapse took down the economy.

It takes brass to defy the facts. And Bill Clinton has brass.


Thomas Sowell

Thomas Sowell is a senior fellow at the Hoover Institute and author of The Housing Boom and Bust.

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