Why did the current economic catastrophe occur? There seems to be general agreement among progressives that repeal of the Glass Stiegel act and the general relaxation of oversight of the Banks is the cause. Even dyed-in-the wool de-regulators like McCain seem to agree that a new and improved regulatory structure is needed after the failing financial giants are rescued.
But on the other side, the conservative think tanks have been less concerned with understanding causes than with finding ways of deflecting blame. Their focus has not been so much on how this happened, but on who is responsible. More precisely, they have been focused on how to place the blame on (of course) liberals.
I learned this last night at dinner where I was told in no uncertain terms that the problem arose because liberals had insisted that banks make home loans to unqualified buyers. I now have it on strong authority that banks have actually been sued for refusing to make such loans.
I'm sorry that I was unable to get detailed references to these suits, but I think I know in a general way where these accusations come from. It has not been in the news lately, but in the 1960's and 1970's there was an active battle against redlining. This was the practice of discriminating against minorities by denying loans, insurance or other vital services to residents of minority neighborhoods. Of course this kept the value of property in those neighborhoods seriously depressed and made it very difficult for property owners in those neighborhoods to move out. This inability of minorities to take advantage of the growth in real-estate values is sometimes blamed for the disparity in wealth in this country based on ethnic groups.
I have no doubt that law-suits were launched regarding this practice and no doubt this kind of pressure led bankers to think seriously and creatively about the issue. Quite possibly this deep thought motivated them to invent some of the preditory lending practices and the packaging and sale of financial instruments that are the immediate cause of the current crisis.
One could see our current financial predicament as an unintended consequence of trying to eliminate descrimination; alternatively, one could see this as just some very clever spin by people who have always been unwilling to accept responsibility.
