Ping
Community Reinvestment Act
From Wikipedia, the free encyclopedia
Jump to: navigation, search
The Community Reinvestment Act (or CRA, Pub.L. 95-128, title VIII, 91 Stat. 1147, 12 U.S.C. § 2901 et seq.) is a United States federal law that requires banks and thrifts to offer credit throughout their entire market area and prohibits them from targeting only wealthier neighborhoods with their services, a practice known as “redlining.” The purpose of the CRA is to provide credit, including home ownership opportunities to underserved populations and commercial loans to small businesses.
The CRA was passed into law by the U.S. Congress in 1977 as a result of national grassroots pressure for affordable housing, and despite considerable opposition from the mainstream banking community. Only one banker, Ron Grzywinski from ShoreBank in Chicago, testified in favor of the act. [1]
The CRA mandates that each banking institution be evaluated to determine if it has met the credit needs of its entire community. That record is taken into account when the federal government considers an institution’s application for deposit facilities, including mergers and acquisitions. The CRA is enforced by the financial regulators (FDIC, OCC, OTS, and FRB). In 1995, as a result of interest from President Clinton’s administration, the implementing regulations for the CRA were strengthened by focusing the financial regulators’ attention on institutions’ performance in helping to meet community credit needs. These changes were very controversial and as a result, the regulators agreed to revisit the rule after it had been fully implemented for five years. Thus in 2002, the regulators opened up the regulation for review and potential revision.
Actually both these links are very interesting relative to Thomas Sowells discussion this thread. I previously posted the first one in commentary #6 above, so that’s a duplicate. It was written in 1993, but the second one in this commentary is as I recall much more recent. Regardless I see the first one as the “before”, and the second one as the “after”, or the result of the Clinton’s actions.
http://findarticles.com/p/articles/mi_m1282/is_n25_v45/ai_14779796
http://www.freerepublic.com/focus/f-news/1965239/posts
Sowell has a point the the government sure didn’t help matters with the Community Reinvestment Act which was passed in 1977 and “strengthened” in 1995. However, this is a very complex crisis and there is probably plenty of blame to go around.
The investment salesmen were turning a blind eye to investors bidding up prices by fraudulently obtaining resident loans. Also, the mortgage brokers were clearly pulling a fast one with the marketing of subprime loans as investment instruments.
I’d like to hear an assessment of the effect the Fed had by lowering prime which induced a lot of buyers into the market.
Like I said, lot’s of blame to be spread around.
“It was not that many years ago when there was moral outrage ringing throughout the media because lenders were reluctant to lend in certain neighborhoods and because banks did not approve mortgage loan applications from blacks as often as they approved mortgage loan applications from whites.
All this was an opening salvo in a campaign to get Congress to pass laws forcing lenders to lend to people they would not otherwise lend to and in places where they would not otherwise put their money.”
Bingo!
Politicians get away with this to the extent that we gullibly accept their words and look to them as political messiahs.
Been telling liberals about red lining for years. They just say” what is red lineing.
A shot across Obama's bows?