I wrote to you previously (Meet Barry Obama, 'Fair Housing' Lawyer) about
the Community Reinvestment Act, a law which compels banks to make home loans
in minority neighborhoods to people who were poor credit risks. Although the
CRA is well known in the financial industry, political pundits and reporters
often know very little about finance and so have missed this extremely
important aspect of the story. Ignorance of economics doesn't help much
either. The political class seems blissfully unaware of the concept of
unintended consequences which is the idea that laws which are designed to
make our lives better often make our lives worse.
On a recent edition of Kudlow and Company, I debated Vermont Senator Bernie
Sanders on precisely this point. He seemed not only to disagree with my
point that if congress compels banks to make Subprime loans, then they share
responsibility for the crisis that results when the borrowers default; he
seemed not to understand it. For him once we identify the target group as
bankers, nothing else matters - they're bad and he's good, no more reasoning
is necessary.
It's not just Congress that's responsible. Yes, they forged the weapons, but
some army needed to wield them. That's where guys like Barry Obama came in
to the picture. When Barry (who was gradually changing his name to Barack
around this time) graduated from Columbia, he took a brief stint as a
researcher writing for a corporate consulting firm. According to his memoirs
he thought of himself as 'a spy' who was dropped 'behind enemy lines'.
Shortly thereafter, he left the enemy territory of corporate America and
moved to a job about which he could feel proud - he went to work for the New
York branch of the Public Interest Research Group. PIRG is one of those left
of center activist groups who, among other things, uses the legitimate
concept of 'fair housing' to force banks into making bad loans. PIRG has
actively lobbied for a stronger (yes, you guessed it) Community Reinvestment
Act.