A favorite conservative trope is to blame the housing crisis (or even the entire economic meltdown) on lending in low-income, typically minority, neighborhoods, done under the auspices of the Community Reinvestment Act (CRA). “I don’t remember a blaring call that said, Frannie and Freddie are a disaster, loaning to minorities and risky folks is a disaster,” Fox News’ Neil Cavuto put it.

As CAP’s Tim Westrich noted, the reality is that “CRA-covered institutions succeed at bringing conventional, prime loans to lower-income communities, while non-covered institutions are the ones that drove bad practices.” And according to some of its former loan officers, bailed-out bank Wells Fargo was, for a decade, “systematically singling out blacks in Baltimore and suburban Maryland for high-interest subprime mortgages”:

These loans, Baltimore officials have claimed in a federal lawsuit against Wells Fargo, tipped hundreds of homeowners into foreclosure and cost the city tens of millions of dollars in taxes and city services. Wells Fargo, [former loan officer] Ms. Jacobson said in an interview, saw the black community as fertile ground for subprime mortgages, as working-class blacks were hungry to be a part of the nation’s home-owning mania. Loan officers, she said, pushed customers who could have qualified for prime loans into subprime mortgages. Another loan officer stated in an affidavit filed last week that employees had referred to blacks as “mud people” and to subprime lending as “ghetto loans.”

As Nick Baumann at the Mojo Blog put it, “if this is true, there’s a word for it: evil.” The nasty racism is bad enough, but the fact that these aspiring homeowners were actively steered toward subprime loans when they qualified for a prime loan makes it all even worse.

After all, as the New York Times noted, “for a homeowner taking out a $165,000 mortgage, a difference of three percentage points in the loan rate — a typical spread between conventional and subprime loans — adds more than $100,000 in interest payments.” As Judd Legum pointed out, “many of the individuals who were pushed into these loans may have been able to avoid foreclosure if they were offered the prime loans for which they were qualified.”

This is all part and parcel of the ugly growth of subprime lending — driven by non-CRA covered institutions and encouraged by Wall Street banks ready to buy and securitize anything. That — and not lending in low-income neighborhoods — was really the culprit behind the housing implosion.

Last week, it was widely reported that the Obama administration will unveil its plan for reforming financial regulation during the week of June 17. One of the really common sense proposals that’s been mentioned is merging the Securities and Exchange Commission (SEC) with the Commodity Futures Trading Commission (CFTC).

The two agencies have begun stepping on each other’s toes in recent years, as more and more companies started using derivatives — financial instruments used to mitigate economic risks. Once confined to the agricultural world (and thus regulated by the CFTC), they now fuel business for banks (regulated by the SEC) to the tune of hundreds of trillions of dollars. (See chart after the jump.)

SEC member Elisse Walter said that the two agencies have become “increasingly indistinguishable,” while SEC Chairman Mary Schapiro said that she believes “logic and efficiency” can be achieved with a merger. And yet, the Obama administration is reportedly scuttling a merger plan.

Why? Because congressional members of the agriculture committees (which have jurisdiction over the CFTC) don’t want to lose out on the money that they receive from banking interests. CNN Money reports:

Most veteran congressional watchers say a merger would give the banking committees more power, while the agricultural committees would lose power. The agricultural panels don’t like that idea much…In addition, lawmakers who lose jurisdiction over the CFTC could lose lucrative campaign contributions from banks and investment firms.

“Lucrative” is indeed the word to use, considering that “during the 2008 election cycle, House agricultural committee members collected $8.6 million and Senate agricultural committee members collected $28.4 million from the financial services sector.”

CFTC Chairman Gary Gensler has also come out against a merger, even though the CFTC, by its own admission, was created to deal with trading in the agricultural sector. It makes very little sense for the CFTC to be regulating the instruments wielded by Wall Street behemoths. Effectively reforming financial regulation is going to be a difficult nut to crack as it is, and this kind of inter-committee and inter-agency sparring seems to play to the advantage of the industries that are looking to blunt the regulatory push.

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Late last year, conservatives advocated pushing GM into a Chapter 11 bankruptcy proceeding. Echoing the conservative line last December, Sen. Jim DeMint (R-SC) told the Fox Business Network:

“We don’t think it is the role of government to intervene…We need to let the market and the laws work the way they are already in place.”

But doing it then, without a pre-packaged agreement amongst creditors, suppliers, workers and management, alongside protections for consumers, could have been disastrous.

As Susan Helper, an economics professor at Case Western Reserve University, told the Huffington Post, “I thought filing for bankruptcy in December would be a disaster…It would have focused people on fighting over who was going to get paid, rather than making the companies work better.”

Merely plunging into bankruptcy proceedings without a prepackaged plan would have left suppliers and manufacturers of intermediate goods (who provide parts and materials for every car company with factories in the Unites States — including Toyota and Honda) struggling to secure credit, forcing cascading layoffs and stalled production that would have caused slowdowns throughout the industry. Combined with customers who would steer clear of Detroit brands because of uncertainty surrounding maintenance warranties, a messy bankruptcy could have have kicked off a vicious downward spiral that could have ended in liquidation and enormous job losses.

A study from the Center for Automotive Research suggests that an unsuccessful bankruptcy of GM and Chrysler would have cost approximately 1.3 million jobs. “Instead,” reports the New Republic, “the likely hit from the twin restructurings is 250,000.”

A GM in bankruptcy last November, in the midst of a nearly frozen credit-market, would have found it nearly impossible to find creditors to finance them through a Chapter 11, so without government assistance, they probably would have had to undergo a rapid and jarring liquidation under Chapter 7. This would have meant mass layoffs, a sell-off of assets at bargain basement prices, dismantling of factories, and hundreds of thousands more Americans straining states’ fraying unemployment safety nets, and a denial of millions of dollars in revenue to starved state budgets. Read more