Rep. Michele Bachmann is facing increasing heat for repeated statements tying the banking crisis to a 30-year-old law that addressed the racist practice of redlining by lenders. Her statements led to sharp criticism from fellow Minnesota Rep. Keith Ellison and her political opponents, and resulted in Bachmann’s being forced to defend her statements as non-racist.
At a House Financial Services Committee hearing on Thursday, Bachmann forwarded a conservative talking point designed to scapegoat the Community Reinvestment Act (CRA), a law that compelled certain financial institutions to ensure that every creditworthy American has an equal opportunity to secure a mortgage, as the major cause of subprime lending. It’s a talking point critics say Bachmann might have wanted to investigate further before putting it into the congressional record.
Because of CRA, Bachmann said, “[President Bill Clinton] turned the two quasi-private, mortgage-funding firms into a semi-nationalized monopoly that dispensed cash to markets, made loans to large Democrat [sic] voting blocs and handed favors, jobs and money to political allies. This potential mix led inevitably to corruption and the Fannie-Freddie collapse.”
“Loans started being made on the basis of race, and often little else,” she said.
For decades the banking industry openly “redlined” minority neighborhoods by refusing to generate mortgages while members of those neighborhoods were intentionally kept out of white neighborhoods. There was virtually little chance that people of color could gain credit. CRA was passed to fix that. But even with government intervention, minority communities still face discrimination in lending.
Bachmann, a Republican who represents Minnesota’s 6th District, drew the ire of Ellison, the Minneapolis Democrat and fellow Financial Services Committee member, whose office said the representative was greatly disappointed by Bachmann’s comments. In committee, he said:
I personally am not going to just sit by and let people trash programs that helped folks get into housing who have been struggling to get in. Fannie and Freddie — I don’t think are failed models. CRA certainly isn’t a failed program. These are important and good programs and should be protected. And if you want to find blame somewhere, let’s look at Gramm-Leach-Bliley. Let’s look at the very deregulation that so many people called for and clamor for and now we see what deregulation, lack of corporate responsibility put together with flat declining wages for the American people will bring about. It’s brought about this.
Bachmann’s statements also spurred Ellison to send a letter to House Minority Leader John Boehner, signed by many members of the Congressional Black Caucus, condemning her statements. The letter read, in part:
We write as members of the Congressional Black Caucus asking that you clarify your caucus position on minority lending being the cause of the current financial crisis … There is no evidence to support Rep. Bachmann’s assertion that “minorities” caused the current financial crisis. Laws designed to open opportunities for equal access to credit does not require banks or thrifts to make loans that are unsafe or unprofitable. In fact, laws like the CRA mandate exactly the opposite. The law stipulates that CRA lending activities must be done consistent with safe and sound banking practices. Additionally, research clearly shows that the majority of the predatory loans that have led us to this financial mess were originated by non-bank financial institutions and other entities that did NOT have a CRA obligation and lacked strong federal regulatory oversight. Shifting the blame for the current economic crisis to laws that allow equal access and opportunity to communities of color is ridiculous.
Ellison and the CBC may be correct. The number of financial institutions involved in the proposed Wall Street bailout and subprime mortgage default-swapping that even applied for CRA credit is low. Of the big names, Bear-Stearns, AIG, CitiGroup, Washington Mutual, UBS of Switzerland and Nomura of Japan weren’t subject to CRA regulations. In addition, as the economics of the housing market shifted, many of the subprime loans generated were made by mortgage brokers who are not subject to CRA.
Rep. Barney Frank, D-Mass., chairman of the Financial Services Committee on which both Bachmann and Ellison sit, penned a letter to the Star Tribune directly countering Bachmann’s talking points:
Bachmann … incorrectly points to the Community Reinvestment Act as a source of our current problems. CRA, originally passed in 1977, does not require banks or thrifts to make loans that are unsafe or unprofitable. In fact, federal law requires that CRA lending activities must be done consistent with safe and sound banking practices. In reality, most high-cost loans were originated by lenders that did not have a CRA obligation and lacked federal oversight.
Predictably, her opponent, DFL and Independence Party candidate El Tinklenberg, seized on Bachmann’s ill-informed talking points:
[O]n the floor of the U.S. House of Representatives, Rep. Michele Bachmann revealed herself to be the worst kind of partisan. Comments like hers only fuel the divisiveness that dominates our political life. It would be morally and politically wrong to stand by and let these comments go unchallenged. More than ever now, I look forward to engaging her at Monday’s debate in Monticello. It’s time for Rep. Bachmann to answer to her constituents for her polarizing views.
The fracas over her statements put Bachmann on the defensive over the weekend. “It was an unfair characterization of my remarks,” she told the St. Cloud Times, referring to a Roll Call article about her statements. “I read a portion of an article critical of the Community Reinvestment Act, which I’m not a fan of. They were not my words.”
Bachmann was reading from an opinion piece by Terry Jones, an editor for Investor’s Business Daily, a financial newspaper geared toward executives and with a decidedly conservative bent.
“[CRA] may in the future inhibit ownership for minorities and communities of color,” she said. “It does not mean that I’m a racist … because I’m critical of that bill.”