I think that's is a bit exaggerated, to say the least. I'll give you credit for not going into a rant about socialism. I've found to be well above that sort of nonsense.
Originally Posted by j-mac
Here's my view (from Communist Central):
The CRA simply outlawed redlining. It's very important legislation that continues to serve the national interest, and it cannot reasonably be associated with the collapse of the housing market because it did not play a significant role in the bad loans.
It specifically cautioned against high-risk loans. Have you guys read the law, or are you at least generally familiar with its elements? It's not "socialism," it's the very heart of the American Way, enacted in furtherance of the Equal Protection Clause of the Fourteenth Amendment: to see that women and minorities are not discriminated against. It should not be distorted in an effort to gain political advantage.
Most sub-prime loans (about 75%) were issued by institutions that were not at all or only partially regulated by the CRA. And the most irresponsible ones, with rates as much as twice as high as regulated banks and thrifts, came from independent mortgage companies.
Just the idea that a lending crisis created from 2004 to 2007 was caused by a 1977 law is silly. But it’s even more ridiculous when you consider that most subprime loans were made by firms that aren’t subject to the CRA.
Finally, keep in mind that the Bush administration has been weakening CRA enforcement and the law’s reach since the day it took office. The CRA was at its strongest in the 1990s, under the Clinton administration,a period when subprime loans performed quite well. It was only after the Bush administration cut back on CRA enforcement that problems arose,a timing issue which should stop those blaming the law dead in their tracks. The Federal Reserve, too, did nothing but encourage the wild west of lending in recent years. It wasn’t until the middle of 2007 that the Fed decided it was time to crack down on abusive practices in the subprime lending market. Oops.
Better targets for blame in government circles might be the 2000 law which ensured that credit default swaps would remain unregulated, the SEC’s puzzling 2004 decision to allow the largest brokerage firms to borrow upwards of 30 times their capital and that same agency’s failure to oversee those brokerage firms in subsequent years as many gorged on subprime debt. — Community Reinvestment Act had nothing to do with subprime crisis
Here's Fed chair Yellen at a conference in 2008:
There has been a tendency to conflate the current problems in the subprime market with CRA-motivated lending, or with lending to low-income families in general. I believe it is very important to make a distinction between the two. Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans, and studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households.
And here's a former Clinton Treasury official at a congressional hearing:
In fact, subprime lending exploded in the late 1990's, reaching over $600 billion and 20 percent of all originations by 2005. More than half of subprime loans were made by independent mortgage companies, another 30 percent by affiliates of banks or thrifts, and the remaining 20 percent were made by banks and thrifts themselves.
Although reasonable people can disagree about how to interpret the available evidence, my own judgment is that the worst and most widespread abuses have occurred in the institutions with the least Federal oversight.
I will admit that this is a complex issue and there is certainly room for disagreement. Now that you've suffered through my perspective, you might be encouraged to find support for yer view in this article: Here's How The Community Reinvestment Act Led To The Housing Bubble's Lax Lending.
The sentence I'd pick out of it is: "It isn’t losses from CRA loans that drove the crisis (although they are disproportionately responsible for losses at some banks). Instead, the CRA required lax lending standards that spread to the rest of the mortgage market. That fueled the mortgage boom and bust."
"Fueled," as in "contributed to," not "caused," or even "drove." (There are errors in that piece that get by a spellchecker; makes ya wonder if you should lend it much credibility. I say that as a loyal member of the Federated Copyeditors Union Local 743. )
You can join me in blaming Clinton, Bush, Greenspan, and those in Congress who voted to gut the mortgage lending regulations, but I'd say yer barking up the wrong tree in laying the blame on the CRA. Finally, I would note that Dodd-Frank was passed in 2010, long after the problems in the housing market developed.
What happened? Do the doctors give you any hope for a recovery?
Originally Posted by zimmer