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Home Publications Blogs Beat the Press NYT Whitewashes German Right-Winger

NYT Whitewashes German Right-Winger

Friday, 20 June 2014 04:03

The NYT ran a piece profiling former IBM executive and Bank of America adviser Hans-Olaf Henkel, who is now head of a German anti-euro party. While it discusses much of his background in business and politics, it neglected to mention his efforts to blame the U.S. housing bubble and financial crisis on anti-discrimination laws. Specifically, he attributed the crisis to the 1977 Community Re-investment Act (CRA), which prohibited banks from discriminating based on the racial compensation of a neighborhood and required them to invest in the areas from which they were drawing deposits.

As Henkel described the problem:

"Mr. Galbraith [University of Texas economist James Galbraith] should familiarize himself Jimmy Carter's "Housing and Community Development Act" where in Section VIII Banks were prohibited the practice of "red lining" which until then enabled them to distinguish 'better living quarters' and 'slums.'"

This tidbit would seem to provide an important insight into Mr. Henkel's background that deserves to be noted in a profile.

As a practical matter, Henkel's claim about the CRA is absurd on its face. Much of the sub-prime lending of the bubble years was done by financial institutions that were not  covered by the CRA to areas that would not be covered. Huge subprime lenders like Ameriquest, Countrywide, and New Century mostly raised their money on Wall Street, not from bank deposits and therefore were not subject to CRA regulation. Furthermore much of the lending was to newly built exurbs that would not be covered by the CRA, which was intended to protect inner city neighborhoods.

The subprime loans were made for the old-fashioned reason, they were hugely profitable. Bankers don't need government bureaucrats to tell them to make money.

Comments (6)Add Comment
Good Conspiracies Age With Time to Prove Themselves
written by Last Mover, June 20, 2014 5:48
The Fair Housing Act of 1968 (passed under President Johnson) outlawed redlining. Under Henkel's "logic" it, after over a 30-year latency period, caused the global financial crisis. Black borrowers ("slum" dwellers all) destroyed the global economy. And Jews caused Germany to lose World War I by stabbing it in the back.

But it gets better. Herr Henkel claims that he is on a mission to fight a blood libel. He is enraged that opponents of the disastrous financial system smear (Verunglimpfen) that system on the basis of the wrongdoing of the CEOs leading our most elite banks. This makes his casual, fact-free, smear of blacks all the more appalling and hypocritical.

Why is this a problem? It squares perfectly with the plot uncovered by birthers to destroy America by installing Obama as president. That had a 30-year latency period too.

Planning and executing well takes time and that goes for conspiracy theories too. If you release them too soon people get suspicious they were made up of out of thin air.

Let them simmer a good long while and cook up with a solid foundation so people can really understand how finance and bankers actually work to create home ownership, growth and jobs absent government interference.

Hug your banker today America. Even if he is black don't worry, he's not too black to fail.
Why lump critics of currency union with no fiscal/banking union with xenophobes?
written by jaaaaayceeeee, June 20, 2014 7:17

Krugman wrote, "As its economy shrank, Florida paid much less in federal taxes, even as federal spending in Florida rose; I’ve estimated the de facto federal aid to Florida in 2010 at around 5 percent of GDP. That’s aid, not loans; anything on that scale would have been inconceivable in Europe".

An explanation of euro skepticism that ignores Europe's lack of fiscal integration and banking union is vry strange. Might demands for austerity (ever more spending cuts) complicate facile denunciations of xenophobia?
Those dear, gentle compassionate bankers are very fortunate ....
written by John Puma, June 20, 2014 7:29
... that they were not operating in areas covered by the CRA.

The CRA-covered areas are simply packed with those sly, crafty (and tinted) "predatory borrowers" who would collapse our hallowed capitalism itself to fulfill their squalid agendas to attain the American Dream ... don'tcha know.
written by dax, June 20, 2014 8:03
Of course the NYT whitewashed him. He's against the euro. The NYT has been running a campaign against the euro for almost 3 years.
We must see the reliance on the CRA
written by Lord, June 21, 2014 12:52
as a continuing class/racial storyline.
Financial Institutions' Primary Purpose
written by James, June 21, 2014 2:05
Well, at least on the banks' charter applications, which they will present a compelling story that they and wherever their branches are to server their COMMUNITIES.

So, how do you server your communities? By red-lining them while using potentially tax-payers' money to fund your operations to do that?

Banks need banking charter, folks.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.