Barney Breaks It Down

Who really caused the credit crisis?

• Barney Frank has found another cause for the credit panic: racist Republicans. "They get to take things out on poor people," the House Financial Services Chairman said at a Boston symposium Monday. "Let's be honest: The fact that some of the poor people are black doesn't hurt them either, from their standpoint."

Rep. Barney Frank (D., Mass.)

No one thinks poor or black people are to blame for the lending mania at the root of the mess. But there is little question that it resulted, at least in part, from a push to relax lending standards so as to make it easier for poor and minority borrowers to get mortgages. This in turn created incentives for banks to make bad loans, many of which Fannie Mae and Freddie Mac acquired.

An influential 1992 report from the Boston Fed recommended: "Policies regarding applicants with no credit history or problem credit history should be reviewed. Lack of credit history should not be seen as a negative factor. Certain cultures encourage people to 'pay as you go' and avoid debt." The head of the Boston Fed at the time, Richard Syron, was ousted last month as CEO of Freddie Mac.

Not all Democrats agree with Mr. Frank that such policies are off-limits to criticism. Last week Representative Artur Davis of Alabama said in a statement: "Like a lot of my Democratic colleagues I was too slow to appreciate the recklessness of Fannie and Freddie. I defended their efforts to encourage affordable homeownership when in retrospect I should have heeded the concerns raised by their regulator in 2004. Frankly, I wish my Democratic colleagues would admit when it comes to Fannie and Freddie, we were wrong."

Mr. Davis is a Member of the Congressional Black Caucus.