Discussing financial crisis, Buchanan baselessly blamed lending in “minority communities”

Written by Jeremy Holden

Published

On MSNBC, Pat Buchanan perpetuated the myth that government efforts to expand affordable housing to underserved communities caused the financial crisis, a charge that has frequently taken the form of attacks on the Community Reinvestment Act. In fact, as Fed chairman Ben Bernanke has stated: “Our own experience with CRA over more than 30 years and recent analysis of available data, including data on subprime loan performance, runs counter to the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties.”

During the February 20 edition of MSNBC's Morning Joe, political analyst Pat Buchanan perpetuated the myth that government efforts to expand affordable housing to minorities caused the current financial crisis, asserting that “the feds leaned on banks and threatened some of these banks, 'You've got to make more loans,' and pushed them out -- you gotta help, frankly, in minority communities. And they pushed them out and the guys put nothing down and stuff, and then the banks sell the loans off to Fannie and Freddie.” Host Joe Scarborough responded, “And that's what happened. Banks made bad loans. They sold it to Fannie and Freddie.”

As Media Matters for America documented, the myth that the financial crisis was caused by federal pressure on banks to expand affordable housing to minorities and other underserved communities frequently takes the form of attacks on the Community Reinvestment Act (CRA). But actions taken by banks to expand lending to underserved communities, the focus of CRA, did not cause the financial crisis, according to Federal Reserve chairman Ben Bernanke, who stated in a November 25, 2008, letter: “Our own experience with CRA over more than 30 years and recent analysis of available data, including data on subprime loan performance, runs counter to the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties.” Janet Yellen, president and CEO of the Federal Reserve Bank of San Francisco, stated in a March 2008 speech that “studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households.”

Moreover, according to housing experts, a large percentage of subprime loans were not made by lenders governed by the CRA, which applies only to depository institutions. A study released in January 2008 by a law firm specializing in CRA compliance estimated that in the 15 most populous metropolitan areas, 84.3 percent of subprime loans in 2006 were made by financial institutions not governed by the CRA. Nor did actions by Fannie and Freddie cause the financial crisis, according to experts, including economist Dean Baker, who has stated:

Fannie and Freddie got into subprime junk and helped fuel the housing bubble, but they were trailing the irrational exuberance of the private sector. They lost market share in the years 2002-2007, as the volume of private issue mortgage backed securities exploded. In short, while Fannie and Freddie were completely irresponsible in their lending practices, the claim that they were responsible for the financial disaster is absurd on its face -- kind of like the claim that the earth is flat.

Buchanan's comments echo those of Boston Globe columnist Jeff Jacoby, who, as Media Matters documented, cited minority lending in a September 28, 2008, column. Also, on that day's edition of Fox News' Your World, host Neil Cavuto asked Rep. Xavier Becerra (D-CA), "[W]hen you and many of your colleagues were pushing for more minority lending and more expanded lending to folks who heretofore couldn't get mortgages, when you were pushing homeownership ... Are you totally without culpability here?" Cavuto later said, “I'm just saying, I don't remember a clarion call that said, 'Fannie and Freddie are a disaster. Loaning to minorities and risky folks is a disaster.' ”

From the February 20 edition of MSNBC's Morning Joe:

BUCHANAN: The feds, Joe, the feds leaned on banks and threatened some of these banks, “You've got to make more loans,” so the banks -- and pushed them out -- you gotta help, frankly, in minority communities. And they pushed them out and the guys put nothing down and stuff, and then the banks sell the loans off to Fannie and Freddie.

SCARBOROUGH: And that's what happened. Banks made bad loans. They sold it to Fannie and Freddie. Fannie and Freddie sold it to Wall Street.

DR. NANCY SNYDERMAN (NBC News chief medical editor): That's right.

SCARBOROUGH: They turned it into securities, chopped it up, sent it around the world, and here we are with the Dow Jones at its lowest rate since 1632.