Posted on 10/03/2008 7:33:27 AM PDT by cp124
Fresh off the false and politicized attack on Fannie Mae and Freddie Mac, today we’re hearing the know-nothings blame the subprime crisis on the Community Reinvestment Act — a 30-year-old law that was actually weakened by the Bush administration just as the worst lending wave began. This is even more ridiculous than blaming Freddie and Fannie.
The Community Reinvestment Act, passed in 1977, requires banks to lend in the low-income neighborhoods where they take deposits. 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. University of Michigan law professor Michael Barr testified back in February before the House Committee on Financial Services that 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations. As former Fed Governor Ned Gramlich said in an August, 2007, speech shortly before he passed away: “In the subprime market where we badly need supervision, a majority of loans are made with very little supervision. It is like a city with a murder law, but no cops on the beat.”
(Excerpt) Read more at businessweek.com ...
If you go here: http://www.freerepublic.com/focus/f-news/2094202/posts
there are some 70 comments that may be helpful.
Well your liberal buddy is wrong.
Instead of reading Business Weak and the so-called journalist shilling for the left, maybe he ought to read the commentary of a Harvard economist...who knows more than Mssr. Pressman.
This on CNN.COM:
http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html
One key quote: This means, at a general level, abandoning the goal of home ownership independent of ability to pay. This means, in particular, getting rid of Fannie Mae and Freddie Mac, along with policies like the Community Reinvestment Act that pressure banks into subprime lending.
Remember if the Fed will buy it, we can sell it.
A small business owner in my neighborhood refinanced her house. When she took the paperwork home she noticed that Hispanic was circled as her ethnic group. She’s Italian and she called the broker. He said don’t worry about it. She wasn’t worried, she was pissed. Don’t tell a Sicilian they’re Hispanic! He gets credited for minority lending.
Get a new buddy, your buddy and the author are very, very stupid people.
You won’t be long in the mortgage business if your competitors offer better deals. If the government mandates a portion of the lending industry to offer such loans, after awhile others will follow or go out of business.
The biggest issue remains interest rates being to low to long. Combine that with anything goes lending rules and you have easy money for all...
Ask your friend who’s job it is to provide oversight. Then ask him/her where was congress the last two years?
Business Week is garbage.
They have been wrong for decades on most everything.
Good contrary indicator.
Tell your liberal buddy that the author shows his true colors by pretending not to understand the following:
- When lenders are competing with institutions that ARE covered by the CRA, they will necessarily lower their standards.
- The impacts of Clinton’s 1995 relaxation of standards and imposition of penalties for lenders with “low CRA scores”.
The simple fact that he doesn’t mention the 1995 rule change gives away his bias.
Drop this in your browser:
http://lists.cohousing.org/archives/cohousing-l/msg00082.html
This is an email sent by a “community organizer” in 1993 regading NCNB and “red lining”. I lived in Charlotte during this time and there was a good bit of attention being focused on NCNB and their supposed “red lining”.
Shove it up your liberal friends nose.
No need to swallow it. Just read the comments at the bottom of that article to debunk it and follow the links offered by some of the posters there if you want more detail.
As far as spin goes, this blog entry isn't even that good. Look to where he mentions specifics, and where he suddenly gets vague.
CRA was passed in 1977 under Carter, but aggressive new regulations under the Act were adopted in 1995 by Clinton. That’s when the debacle began. Don’t let your buddy spin ya. CRA is the original worm at the core of what is now a very big and rotten apple.
It took a many years for the price of houses to balloon as a result of increased buyers, looser credit and downpayment standards etc. It didn’t happen overnight.
Eventually the price of houses that previousily unqualified buyers paid outrageous amounts for posed a real risk of housing deflation after defaults.
Example..we had a poor relation who bought essentially a slum house for 90k in San Diego. The 100% loan was 30% of their income. They then watched the house go to about $200 in value and since they had run up their credit cards they refinanced it for about $190. That was over 50% on their income..they paid off their cards and bought new cars.
The house went to $250k..they were in the midst of trying to refinance when the market started down(since they had run up their cards again). They are now in foreclosurer.
None of these high risk subprime loans would have been made with loose Fannie and Freddie financing. This process took them from 2000 to 2008. Now the house value has tanked and the bank has a bad loan. This happened in the whole area they were in..low cost housing and mostly minority neighborhood. There are a forest of foreclosure signs in it now.
Send it back to him and tell him to read the comments below tearing it to pieces.
Read the comments below the article. For the most part, they are doing a great job of eviscerating the piece.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.