Except that the CRA did not apply to all banks. In fact the CRA's actual coverage was relatively small as a percent of the market and most of the subprime were mortgages issued outside of the CRA regulation. If you want to claim that the CRA lowered requirements, then we can also blame a whole host of other factors, including the Republican drive to eliminate obstacles under the grandiose theme of Bush's "Ownership Society." The fact that the CRA operated for three decades without this mess suggests it wasn't the primary issue. Removing the housing sector ENTIRELY, American debt from corporations to governments to individuals was due for a correction. No country can keep moving with that use of leverage and not encounter a correction sooner or later. Sure did the housing market cause the first tumble? No doubt. But if we had moderate levels of leverage, responsible banking, responsible CDS, healthy individual savings, we would absolutely NOT be in this mess.Because it did. In 95 banks were required to meet a certain percentage of LMI (Low and Moderate Income) customers to meet CRA standards as required by regulators and could then also not refuse loans to more qualified customers who were only slightly better off but not up to previous standards of financial stability.
That's right off American Spectator. Do you have anything more reliable, such as actual legislation on Fannie and Freddie?In 2007 Fannie Mae and Freddie Mac were required to show that 55% of their loans were LMIs. From 2005 to 2007, Fannie and Freddie bought approximately $1 trillion in sub-prime and Alt-A loans. This amounted to about 40 percent of their mortgage purchases during that period. Seems sizable to me.
Toxic loans just caused a problem that was going to go bad to go bad faster. And CDS were not a symptom. CDS were a different problem that was exacerbated by the crisis. AIG should never have been issuing liability well in the hundreds of billions pass its liquid capacity to meet even a fraction of that.But that doesnt explain CountryWide, Lehmen Bros, or Washington Mutual. The CDS were a symptom, the toxic loans were the true problem.
The problem is you are arguing that every loan was a CRA loan, covered, regulated and mandated by the CRA. The legislation simply does not support such an argument. And you seem to be highly unable to blame anything but the CRA.Just the opposite, they regulated riskier loans and relaxed standards, they encouraged and enforced them. Maybe you cant see it but government incentives drove all the stupid reckless behavior. If they couldnt make money off it and it were not encouraged by legislation and regulation, they wouldnt have done it. Banks dont just start making risky loans.
Volume or dollar value? You really need to say that. It appears you are just copying the American Spectator article without actually doing any research yourself.From 2003 to late 2006, conventional loans (including jumbo loans) declined from 78.8 percent to 50.1 percent of all mortgages, while subprime and Alt-A loans increased from 10.1 percent to 32.7 percent.
Which by the way I can report you for plagiarism.
The fact that the CRA was operating for thirty years suggests it was something else that caused the decline in home quality sales. that is left out of your American Spectator article. No one is arguing that home buying got real easy. But what you seem to ignore that the CRA wasn't a new thing. And that home ownership didn't get any easier in the thirty years it was operating. If one factor remains constant, doesn't that suggest it was not in fact the issue?Because GSEpurchases are not included in these numbers, in the years just before the collapse of home prices began, about half of all home loans being made in the United States were non-prime loans. Since these mortgages aggregate more than $2 trillion, this accounts for the weakness in bank assets that is the principal underlying cause of the current financial crisis.
Then you haven't been reading my posts carefully.Personally, sounds to me like you think it was all the greedy bankers.
Actually it was more then just that. It was massive overuse of leverage in business and individuals (not mortgages) that did us in. Housing alone should not have caused a mess like this. Businesses reliant upon credit circa South Korea 1997 and a savings rate that's negative are honestly IMO the real issue.It wasnt just that. It was the bankers, brokers, regulators, terrible housing policy, and paid for polticians all responsible. I still feel that the government representatives didnt pay enough and the banks should have been allowed to fail.