Photos Found On Dispatches From a Far Gone World
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.
Bankrupt "Exploiters": Part II
We don't look to arsonists to help put out fires but we do look to politicians to help solve financial crises that they played a major role in creating. 
How did the government help create the current financial mess? Let me count the ways.
In addition to federal laws that pressure lenders to lend to people they would not otherwise lend to, and in places where they would otherwise not invest, state and local governments have in various parts of the country so severely restricted building as to lead to skyrocketing housing prices, which in turn have led many people to resort to "creative financing" in order to buy these artificially more expensive homes.
Meanwhile, the Federal Reserve System brought interest rates down to such low levels that "creative financing" with interest-only mortgage loans enabled people to buy houses that they could not otherwise afford.
But there is no free lunch. Interest-only loans do not continue indefinitely. After a few years, such mortgage loans typically require the borrower to begin paying back some of the principal, which means that the monthly mortgage payments will begin to rise.
Since everyone knew that the Federal Reserve System's extremely low interest rates were not going to last forever, much "creative financing" also involved adjustable-rate mortgages, where the interest charged by the lender would rise when interest rates in the economy as a whole rose.
In the housing market, a difference of a couple of percentage points in the interest rate can make a big difference in the monthly mortgage payment.
For someone who buys a house costing half a million dollars-- which can be a very small house in many parts of coastal California-- the difference between paying 4 percent and 6 percent interest would amount to more than $7,000 a year.
For people who have had to stretch to the limit to buy a house, an increase of $7,000 a year in their mortgage payments can be enough to push them over the edge financially.
In other words, government laws and policies at federal, state and local levels have had the net effect of putting both borrowers and lenders way out on a limb.
Yet, when that limb began to crack, the first reaction in politics and in the media has been to look to government to solve this problem because-- as always-- it was called the market's fault, the lenders' fault and everybody's fault except those politicians who created this dicey situation in the first place.
Markets often get blamed for conveying a reality that was not created by the market.
For example, the fact that "the poor pay more" for what they buy in stores in low-income neighborhoods is often blamed on those who run these stores, rather than on those who create extra costs through crime, vandalism and riots.
If the store owners were making big profits, the big chain stores would be rushing in to share in the bonanza, instead of avoiding low-income neighborhoods like the plague.
Markets were also blamed for the Great Depression of the 1930s and New Deal politicians were credited with getting us out of it. But increasing numbers of economists and historians have concluded that it was government intervention which prolonged the Great Depression beyond that of other depressions where the government did nothing.
The stock market crash of 1987 was at least as big as the stock market crash in 1929. But, instead of being followed by a Great Depression, the 1987 crash was followed by 20 years of economic growth, with low inflation and low unemployment. The Reagan administration did nothing in 1987, despite outrage in the media at the government's failure to live up to its responsibility, as seen in liberal quarters. But nothing was apparently what needed to be done, so that markets could adjust. The last thing politicians can do in an election year is nothing. So we can look for all sorts of "solutions" by politicians of both parties. Like most political solutions, these are likely to make matters worse.
