Posted on 09/19/2008 7:16:55 PM PDT by Eric Blair 2084
This morning on "Morning Joe," Larry Kudlow was asked about some specific reforms that could help the economy.
He noted that the federal government helped create this financial crisis in the mid-nineties by passing the Community Reinvestment Act. According to Wikipedia:
"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 Clinton Administration's regulatory revisions [1] with an effective starting date of January 31, 1995 were credited with substantially increasing the number and aggregate amount of loans to small businesses and to low- and moderate-income borrowers for home loans. Part of the increase in home loans was due to increased efficiency and the genesis of lenders, like Countrywide, that do not mitigate loan risk with savings deposits as do traditional banks using the new subprime authorization. This is known as the secondary market for mortgage loans. The revisions allowed the securitization of CRA loans containing subprime mortgages. The first public securitization of CRA loans started in 1997 by Bear Stearns. [2] The number of CRA mortgage loans increased by 39 percent between 1993 and 1998, while other loans increased by only 17 percent. [3] [4] In short, the federal government began forcing banks to make subprime loans to people who couldn't afford them.
Update: This is from April 15:
KUDLOW: Would you consider, by the way, rolling back the Community Reinvestment Act, which a lot of people say triggered this, mandating banks and other lenders to make substandard loans in the first place, and the creator of the subprime mortgages back in the middle '90s? Is it time to take a look at the Community Reinvestment Act?
Sen. McCAIN: Absolutely, Larry. There were people who predicted that the Community Reinvestment Act might lead to reckless and unsound lending practices just to sort of fill a--you know, a amount of--I don't like to use the word "quota," but certain percentages of a--of a home--of the bank's lending practices. Yes, it has to be re-examined, it has to be judged by its effect, and we need to find out how this particular system affected the overall insolvency of the subprime lending issue. And I think it--I'm not saying it needs to be repealed, but it certainly needs to be re-examined and what its effects have been. And we'll be able to figure that out.
“I [heart] red-lining”
“So we have blamed Clinton and are heading towards blaming Johnson.
What did we do in the last 8 years to stop any of this from happening?”
Nothing. We made it worse by deregulating more.
Post #39 - Very well stated. Spot on.
The reason why most lay people are understandably confused is because this is really complicated and involves 30 years of public policy. It’s a long story.
All I am saying is that it is too simplistic to simply use the MSM populist argument that “Greedy lenders caused this.”
It should be clear that you can create all kinds of red tape to hide what you see in front of your own 2 eyes for the past 6 years(personally) but you can only fool everyone for so long. Yeah technically the wording for CRA’s make it so that they aren’t directly looked at but it’s the repercussions of legislation like this that lead to secondary results. Quit hiding behind red tape. That’s exactly the problem with the Democratic party. They lead you on a chase that takes forever for the common man to figure out.
NOW, look at ACORN. Yes, ACORN. I personally was trying to get a loan after years of struggling as a freelancer trying to prove my income,which I did, and was looking into ACORN before I knew what was going on. My loan agent told me that I couldn’t get an ACORN loan. He said “if you weren’t white and made a little less money then I could get you a loan like that”. So don’t hide behind this crap. The CRA set the standard and the rest followed by competing with these banks who were Mandated to give a certain amount of loans to the undeserving. As I have understood also, banks were given a CRA credit score?
Either way....this type of legislation IS WRONG!
Even if you try and hide behind this not being responsible for the crisis we are in. I know better though. My brand new neighborhood had many foreclosures a year later and Section 8 housing following right beside it.
Thanks a lot. Spent the last 7 years of my life working double time to get out of a bad neighborhood to end up right back in one. I’m not the only one either. I’ve talked to many parents across Arlington and Ft. Worth and it is the same there.
This falsehood that ‘we would have seen the results in Vegas’? What is this? a Jedi mind trick. Look around. It’s everywhere.
The bad news??
"REPUBLICAN" President George W. Bush committed $440 BILLION to the CRA back in 2002, setting up NOT ONLY the titanic financial disaster we're now facing between Bush's $700 billion TARP boondoggle and 0bama's $787 billion 'Stimulus Package', but the leftist Presidency of one B. Hussein 0bama-Soetoro.
CRA doesn’t stand for”Community Reinvestment Act”,it stands for”Community Redistribution Act”!
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