Behind all the complex financial processes that reached to Wall Street and beyond, there is one fundamental fact: many people stopped making their mortgage payments.
Why did that happen? Because mortgage loans were made to people who did not meet the long-established qualification standards for getting a mortgage loan. And why did that happen? Because the Clinton administration threatened lawsuits against lenders who did not approve mortgage loans to minority applicants as often as to white applicants.
Attorney General Janet Reno said that lenders who “closely examine their lending practices and make necessary changes to eliminate discrimination” would “fare better in this department’s stepped-up enforcement effort than those who do not.” She said: “Do not wait for the Justice Department to come knocking.”
Clinton’s Department of Housing and Urban Development had similar racial-quota policies and began taking legal actions against banks that turned down more minority applicants than HUD thought they should.
The Federal Reserve Bank of Boston, for example, issued guidelines for “non-discriminatory” lending which warned lenders against “unreasonable measures of creditworthiness.” Lenders should have standards “appropriate to the economic culture of urban lower-income and nontraditional consumers” and consider “extenuating circumstances.”
In other words, when some people don’t come up to the lending standards, then the lending standards should be brought down to them.
