Last night's "economic" debate among the Republican candidates for president was more of a race to see who could be more hyperbolic in their promises to destroy government, but there's one specific, prominent dog-whistle moment to highlight, courtesy of Michele Bachmann and Newt Gingrich.
TUMULTY: Congresswoman Bachmann, three years after the financial meltdown, Main Street continues to suffer. People have lost their jobs, they've lost their homes, they've lost their faith in the future. But Wall Street is thriving. The banks not only got bailed out by the government, they have made huge profits, they've paid themselves huge bonuses.
Do you think it's right that no Wall Street executives have gone to jail for the damage they did to the economy?
BACHMANN: I think if you look at the problem with the economic meltdown, you can trace it right back to the federal government, because it was the federal government that demanded that banks and mortgage companies lower platinum level lending standards to new lows.[...] It was the federal government that pushed the subprime loans. It was the federal government that pushed the Community Reinvestment Act. It was Congressman Barney Frank and also Senator Chris Dodd that continued to push government-directed housing goals.
Which of course led Newt Gingrich to out-crazy the crazy, and demand that Chris Dodd and Barney Frank be imprisoned. No, seriously. "And if you want to put people in jail—I want to second what Michele said—you ought to start with Barney Frank and Chris Dodd and let's look at the politicians who created the environment, the politicians who profited from the environment, and the politicians who put this country in trouble."
The entire financial crisis is because greedy, "undeserving" (read, "brown" and "poor") people got mortgages they couldn't afford through the Community Reinvestment Act, which somehow didn't create a financial crisis in the three decades since it was passed until now. Given the opening provided by the Republican presidential candidates, the Wall Street Journal jumps right in, opining that the OWS protesters' "anger should be directed at those who developed the federal government's housing policies," blaming "Fannie Mae and Freddie Mac" and the Community Reinvestment Act for being "responsible for the financial crisis."
The notion that the CRA, approved nearly 35 years ago in 1977, had anything much to do with a lending crisis that flowered in 2007 and 2008 has been roundly discredited. In a 2008 speech, Randall Kroszner, a federal reserve board governor, a former member of George W. Bush's Council of Economic Advisers and a business professor at the University of Chicago responded to the charge.
"Some critics of the CRA contend that by encouraging banking institutions to help meet the credit needs of lower-income borrowers and areas, the law pushed banking institutions to undertake high-risk mortgage lending. We have not yet seen empirical evidence to support these claims, nor has it been our experience in implementing the law over the past 30 years that the CRA has contributed to the erosion of safe and sound lending practices," Kroszner said, before discussing a Fed analysis of mortgage data "that runs counter to the charge that the CRA was at the root of, or otherwise contributed in any substantive way to, the current subprime crisis."
Other experts have noted that the majority of subprime loans were made by firms that are not subject to the CRA. University of Michigan law professor Michael Barr has testified on Capitol Hill that half of subprime loans were made by mortgage service companies not subject to comprehensive federal supervision and another third were made by affiliates of banks or thrifts that are not subject to routine supervision.
Here's another expert, one that Republicans are allergic to, Krugman, reinforcing the point that "The Community Reinvestment Act of 1977 was irrelevant to the subprime boom, which was overwhelmingly driven by loan originators not subject to the Act." But he also gets this part right: "It’s convenient to believe that somehow, this is all Barney Frank’s fault; and so that belief will continue."
Because, as we all know, the facts have a liberal bias, and it's much more effective with Republicans to operate on beliefs and those things strangers tell you in passing.