Limbaugh Redefines Redlining To Perpetuate Financial Crisis MythJanuary 10, 2013 4:53 PM EST ››› TERRY KREPEL
Rush Limbaugh falsely redefined redlining, claiming that it involves forcing banks to loan money to people who can't afford to pay it back in order to blame liberals for the financial crisis. In fact, the prohibited practice involves a lending institution's refusal to lend money based on location.
After noting a news article stating that new regulations will require mortgage lenders to verify and inspect borrowers' financial records, Limbaugh said on the January 10 edition of his radio show:
LIMBAUGH: You know what Obama and the Rev. Jackson and the Democrats used to call that? Redlining. When the banks would look at people's financial records and determine whether or not they could pay them back, if they couldn't, they'd line them out in red and they wouldn't get the loan. And of course, the civil rights crowd said "racist, racist, racist" because the minorities were among the largest group not being given loans, and they said it wasn't because of their inability to pay, it's because people are racist at the banks. So they changed the rules to give them the money.
Limbaugh used his definition of redlining in order to promote the persistent myth that efforts by Democrats to expand homeownership to lower-income families caused the housing crisis in 2008. But redlining as it applies to mortgage lending is discrimination against a borrower based on where the property is located -- typically an area dominated by low-income or minority residents -- regardless of the borrower's ability to pay it back.
Researcher Amy Hillier states that "Scholars, journalists, and fair housing activists generally agree that redlining involves ideas about creditworthiness that have little or nothing to do with the mortgage applicant and everything to do with the location of the property."
Further, the literal basis of the word doesn't refer to bankers drawing red lines through the names of applicants deemed insufficiently creditworthy as Limbaugh claimed but, rather, red lines on maps marking areas where bankers or insurance companies would not do business. Hillier writes:
Community activists in Chicago's Austin neighborhood coined the word "redlining" in the late 1960s while organizing residents around what they perceived as unfair lending practices. They used the word "redlining" to refer to the red lines that savings and loan associations had drawn around areas they refused to service (Pogge 1992). In 1968, the President's National Advisory Panel on Insurance in Riot-Affected Areas also found evidence that lenders were drawing red lines on maps. The panel quoted from an underwriting guide that warned against providing insurance to areas with certain high-risk characteristics: "A good way to keep this information available and up to date is by the use of a red line around the questionable areas on territorial maps centrally located in the Underwriting Division for ease of reference by all Underwriting personnel" (President's National Advisory Panel on Insurance in Riot-Affected Areas 1968, 6). The Douglas Commission found the same thing in 1969: "There was evidence of a tacit agreement among all groups--lending institutions, fire insurance companies, and FHA [Federal Housing Administration]--to block off certain areas of cities within 'red lines,' and not to loan or insure within them" (National Commission on Urban Problems 1969, 101).
Several federal laws -- including the Community Reinvestment Act of 1977, which Limbaugh baselessly blamed for causing the financial crisis -- have sought to outlaw redlining.