Whip Comes Down

Quick Fact: WSJ op-ed advances tired and discredited claim that affordable housing caused the housing crisis | Media Matters for America

A November 13 Wall Street Journal op-ed lied that loans made "under the pressure of" the Community Reinvestment Act helped to "fuel the greatest housing bubble our nation has ever seen." The claim that affordable housing initiatives were responsible for the housing crisis is a widely discredited myth.




Bernanke: Experience "runs counter to the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties." In a November 25, 2008, letter, Federal Reserve chairman Ben Bernanke stated: "Our own experience with CRA over more than 30 years and recent analysis of available data, including data on subprime loan performance, runs counter to the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties." http://menendez.senate.gov/pdf/11250...nankeonCRA.pdf


SF Reserve Bank's Yellen: "[S]tudies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households." Janet Yellen, president and CEO of the Federal Reserve Bank of San Francisco, stated in a March 2008 speech that "studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households." President's Speech: Opening Remarks to the 2008 National Interagency Community Reinvestment Conference (3/31/2008)

1 Easy Target

And you bought this line?

Remember that an amendment to the Gramm–Leach–Bliley Act (GLBA) which stated

Gramm?Leach?Bliley Act - Wikipedia, the free encyclopedia

This lead to a situation where banks had to lend to people who didn't have the ability to pay back the loans creating what has since been called toxic assets.

Objective Voice

But I'll say again, it wasn't cheap loans that caused the problem. It was "creative financing" within our financial institutions that allowed leveraging of derivities at such high rates as a byproduct of their cash cow - home loans, property insurance and securities - that caused the problem. The housing market was the catalysist, the financial vehicle that gave the financial markets their "foot in the door" as it were to create riskier investment opportunities. But the cause was deregulation of the housing industry and the lack of regulatory oversight.

Don't get them confused.

1 Easy Target

Actually, it was the refusal of the regulators to do their job. AKA Barney Frank, Chris Dodd, Maxine Waters, etc. Even when people came before their committee to warn of impending doom, they couldn't be bothered.

Why are these people not in prison?

Grim17

Media Matters.... Pass.

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Grim17

Look, this isn't rocket science.

What caused the housing bubble?
A: More demand than supply.

Why was there such a high demand for homes?
A: Because lending standards were lowered, which created a huge influx of first time buyers, and expanded the buyers market.

Why were the lending standards lowered?
A: Because the government forced lenders to do so under the revised CRA standards imposed by the Clinton administration.

Why did lenders take on so many high risk loans?
A: Because they didn't have to assume the risk, because Fannie Mae and Freddie Mac offered to buy as many of the high risk loans that they could write.

Why did Fannie and Freddie buy up those high risk loans?
A: Because they are a government backed lending institution, so the government guaranteed, or insured them if they should fail.

When was this problem discovered, and could the collapse have been prevented?
A: It was brought to the attention of congress in 2001, and yes, it could have been prevented. The Bush administration issued their first warning of a potential collapse back in 2001, and continued to issue warnings that reform was needed. There were hearings on this issue in 2003, and again in 2005, but both reform proposals never made it to the floor. They were killed in committee on mostly party lines.

And there you have it. There are other factors that contributed to the housing market collapse, but it's all rooted in the government forcing banks to lower their lending standards, then refusing to take measures to fix the problem once it was brought to their attention back in 2001.

No matter how you spin it, there's no getting around the fact that not only is it the government's fault for enacting the bad policy that started this thing, but it's also their fault for not fixing it when the could have.

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PeteEU

Not really.. greed.

Yes, but it had more to do with lack of regulation. A huge majority of the bad loans were on an unregulated market and a large portion were sold on false pretences because of the lack of regulation. Funny how you right wingers constantly forget this critical aspect.

Sub prime lending started long before the Clinton administration. What the Clinton Administration did, with a huge help by the Republican's was to remove a bunch of regulation that for one kept a barrier between investment banking and real banking, but also made it possible to make very complicated products that no one really understood and were ultimately the reason we got into such troubles. Why did you forget to mention that during the Clinton administration it was the Republican lead congress that pushed for this deregulation?



This consistent blaming of Freddie and Fannie Mae is nothing but right wing spin. Of the 1.5 trillion dollars in sub-prime mortgages almost none came out of Freddie and Fannie Mae. Why? Because the loans would not meet Freddie and Fannie's strict rules.. ironic no?

One of the main reasons that Fannie and Freddie got into trouble is because of the collapse of the US housing market and economy. Yes they catered to a special portion of the population, a portion that were the first to get hit by the economic crisis, which lead to them not being able to pay for their mortgages and on top of that the fact that their home value had dropped considerably.

Like it or not, a huge majority of the risky sub-prime lending happened outside Fannie and Freddie Mac. I know it goes against the RNC talking points but facts are facts. If you want to get rid of Fannie and Freddie, then why did you not do so during the decade of Republican rule?.. hell why did you not do it under Reagan?

And answer me this.. what proportion of the mortgage market does Fannie and Freddie sit on in the US? 5% 20% 50% or more?

Again more spin. Define "high risk loans". Sub-prime? How much of Fannie and Freddie's mortgage portfolio is sub-prime.. do you know? Or do you consider all of Fannie and Freddie as sub-prime?

Wait a minute. Fannie and Freddie did not enter the sub-prime market until 2002 according to the information I have read... And if the Republican held congress and White House knew of the problem in 2001 then why did they allow Fannie and Freddie to enter the sub-prime market?

No it was because of greedy banks and lending institutions that saw a quick buck in a market where there was no regulation.

What you and your cohorts are doing (and sadly have succeeded some what) is to blame drug addicts and government for allowing the drug lords to rule the land and then giving the drug lords a free ride. Why does the right constantly skip over the fact that it was private companies that created a huge portion of the problem in the first place?

OH I agree it was at the start the governments fault. Deregulation lead to a heroine rush of epic proportions in the private sector. However we all know that the deregulation would never have happened if it was not for the industries lobbying the government into getting rid of the regulations that was holding them back.

Again, why this constant defence by omission of the private sector in context of this crisis?

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PeteEU

Grim17

Hey Pete, I didn't spin anything. Government intervention in the lending industry is what started this mess, and then refusing to address the problem in the name of politics, is what has landed us here today.

Here are a few excerpts from an August 5, 2008 NY Times article that sheds some light on this matter:


The following two sentences from that article bare repeating:

"one of the reasons the firms hold so many bad loans is that Congress has leaned on them for years to buy mortgages from low-income borrowers to encourage affordable housing"

"Once, a high-ranking Democrat telephoned executives and screamed at them to purchase more loans from low-income borrowers"

liblady

you really are missing the point. or better yet, making the point that you are a partisan's partisan.

again, no institution was ever forced by CRA to make bad loans. EVER. greed drove this collapse.

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apdst

Affordable Housing caused the bubble. The bubble burst. The rest is history.

Now, how didn't affordable housing cause the recession, again?

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