Monday, November 24, 2008

All a-twitter

From the destination of Chaucer's pilgrims and the site of the martyrdom of Becket comes a sensible dissent on Twitter®. Still, if Hugh de Morville had Twittered his sovereign on the question of what he was doing right then, Henry Plantagenet would have died with at least one less burden on his conscience and need not have repaired to Canterbury to be whipped. Using more traditional media, crusading editor Tom Gish, owner of the Whitesburg, Kentucky Mountain Eagle, served, with his wife, Pat, as the conscience and scourge of strip mining companies, unresponsive school boards, and heavy-handed police (the paper's offices were fire-bombed after Gish exposed police brutality in 1974). I had never heard of Gish, who died Friday at 82, but listened to this feature from NPR last night, a fine tribute to his life and work.

Meanwhile, the much-maligned mainstream media does its part with this article by Daniel Gross in Newsweek, pointing out, first, something that ought never to have needed to be said: that the subprime crisis cannot be blamed on the Community Reinvestment Act of 1977:

In recent months, conservative economists and editorialists have tried to pin the blame for the unholy international financial mess on subprime lending and subprime borrowers. If bureaucrats and social activists hadn't pressured firms to lend to the working poor, the narrative goes, we'd still be partying like it was 2005 and Bear Stearns would be a going concern. The Wall Street Journal's editorial page has repeatedly heaped blame on the Community Reinvestment Act (CRA), the 1977 law aimed at preventing redlining in minority neighborhoods. Fox Business Network anchor Neil Cavuto in September proclaimed that "loaning to minorities and risky folks is a disaster."

This line of reasoning is absurd on several levels. Many of the biggest subprime lenders weren't banks, and thus weren't covered by the CRA. Nobody forced Bear Stearns to borrow $33 for every dollar of assets it had, and Fannie Mae and Freddie Mac didn't coerce highly compensated CEOs into rolling out no-money-down, exploding adjustable-rate mortgages. Banks will lose just as much money lending to really rich white guys like former Lehman Brothers CEO Richard Fuld as they will on loans to poor people of color in the South Bronx.

More importantly, Gross describes the work of ethical subprime lenders, and no, apparently, that is not an oxymoron. Part of a "community finance" movement, small banks and credit unions, of the sort whose chief officers don't make millions or get pictured in Business Week, are changing their communities for the better, instead of turning them into urban and suburban wastelands. Newsweek describes one example:

"We're in business to improve people's lives and do asset building," says Linda Levy, CEO of the Lower East Side Credit Union. The 7,500-member nonprofit, based on still-scruffy Avenue B, doesn't serve the gentrified part of Manhattan's Lower East Side, with its precious boutiques and million-dollar lofts. The average balance in its savings accounts is $1,400. The typical member? "A Hispanic woman from either Puerto Rico or the Dominican Republic in her late 40s or early 50s, on government assistance, with a bunch of kids," Levy says. Sure sounds like subprime. But the delinquency rate on its portfolio of mortgage and consumer loans is 2.3 percent, and it's never had a foreclosure.

What have these modest enterprises discovered that MBAs from the Wharton School have not?

What sets the "good" subprime lenders apart is that they never bought into all the perverse incentives and "innovations" of the late subprime lending system—the fees paid to mortgage brokers, fancy offices and the reliance on securitization. Like a bunch of present-day George Baileys, ethical subprime lenders evaluate applications carefully, don't pay brokers big fees to rope customers into high-interest loans and mostly hold onto the loans they make rather than reselling them. They focus less on quantity than on quality. Clearinghouse's borrowers must qualify for the fixed-rate mortgages they take out. "If one of our employees pushed someone into a house they couldn't afford, they would be fired," says CEO Bystry.

Speaking of the causes of the subprime crisis, Gross also wrote in praise of Timothy Geithner as "The Un-Paulson" in Slate last week, and in its October issue, Harper's printed a first-person account of "trashing out":

...a phrase we use to describe the process of entering a home that has been foreclosed upon by the bank, and that the bank would like to sell, and hauling all of what the dispossessed owner has left behind to the nearest dump, then returning to clean the place by spraying every corner and wiping every inch of glass, deleting every fingerprint, scrubbing the boot marks off the linoleum, bleaching the cruddy toilets, sweeping up the hair and sand and dust, steaming the stains out of the carpet (or, if the carpet is unsalvageably rancid, tearing it out), and eventually, thereby, erasing all traces of whoever lived there, dispensing with both their physical presence and the ugly aura of eviction....

And speaking of trashing out, the never-bashful Christopher Hitchens has this and a great deal more to say about the President-elect's projected appointment of Senator Clinton as Secretary of State:

A president absolutely has to know of his chief foreign-policy executive that he or she has no other agenda than the one he has set. Who can say with a straight face that this is true of a woman whose personal ambition is without limit; whose second loyalty is to an impeached and disbarred and discredited former president; and who is ready at any moment, and on government time, to take a wheedling call from either of her bulbous brothers?

All too true, though I still think it may be a shrewd move on Obama's part: the Secretary will either rise above herself or not and will do so on the world stage. As Someone Else once said to an associate of uncertain loyalties, "That thou doest, do quickly."

© Michael Huggins, 2008. All rights reserved.

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