Posted on 06/27/2009 3:00:44 PM PDT by FromLori
Earlier this week I noted that I had changed my mind on the Community Reinvestment Act.
Contrary to my initial conclusion, the evidence is overwhelming that the CRA played a significant role in creating lax lending standards that fueled the housing bubble. Once I realized this, I had to abandon my suspicion that the anti-CRA case was a figment of the rhetoric of Republicans attempting to distract attention from their own role in the mortgage mess.
So I laid out the facts and arguments that had convinced me to switch sides in the CRA debate. It was a long series of posts that generated hundreds of responses and counter-arguments. Felix Salmon’s response is here, Barry Ritholtz’s here, Mike Rorty's here, Ryan Chitum’s here, and Matthew Wurtzel’s here. All of my posts are here. Henry Blodget's earlier post on the CRA, with which I largely agreed until recently, is here. If you carefully run through these posts and the accompanying comments, I think you'll see that every argument raised by the "Defend CRA at all costs" crowd has been refuted.
For people with less time on their hands, here's a quick guide to the main points raised by the CRA defenders and the arguments that refute them. If I’ve left out any salient points, please let me know and I’ll add them to the list.
Let's begin:
How could a piece of 1977 legislation be significant to the deterioration of mortgage standards 25 years later? The CRA was not a static piece of legislation. It evolved over the years from a relatively hands-off law focused on process into one that focused on outcomes. Regulators, beginning in the mid-nineties, began to hold banks accountable in serious ways. Banks responded to this new accountability by increasing the CRA loans they made, a move
(Excerpt) Read more at businessinsider.com ...
RATS are responsible. That was said early on before the bailout.
He didn’t convince me. GOP likes to blame the poor folks for everything. Not this one. This is a rich folks problem.
parsy, who ain’t buying this.
Their 'problem' or their 'responsibility'? Exactly which 'rich folks' are we talking about, anyway?
CRA wouldn’t have been nothing without the cartelization of the banking system and the centralization of currency issuance and interest rate price-fixing. Democratic activism is just a surface issue.
“GOP likes to blame the poor folks for everything”
Whatever.
“Not this one. This is a rich folks problem”
Rich folks same as poor were misled by price signals, signals which were manipulated by the government. They’re both victims.
Don’t think there is any fair way long term to give special financial preferences to ‘poor’ people without the same terms being available to everybody, so if it doesn’t make financial sense, better not to go there in the first place.
Both. some rich folks speculated in oil and took about 700 billion out of the economy. This led to people losing jobs and being out so much for gas they couldn’t make their house payments.
then another group of rich people made dumba** commercial loans with the excess money they had then cryed and whined when they got stiffed. Gov’t came running to help the rich folks.
Another group of rich folks persuaded GOP (and Dems) to pass the bankruptcy reform bill so they could make usurious loans to poor folks and middle class with less fear of them going into bankruptcy. So debt went up, and you can’t get blood from a turnip, so there they go and here we go bailing them out.
While other rich folks figured out that they could increase profits if they shipped jobs out to 3rd world countries.
etc etc etc
parsy, who hates yankee bankers and wall street and excessive coverage of Michael Jackson
Explain, please? Throwing an accusation out there doesn't make it so.
True. Both rich and poor are victims. Both rich and poor are responsible. I just don’t think there is any justification whatsoever to put this one off on the poorer folks who bought houses, as opposed to paying rent, which is usually higher.
The greedy rich should have been reeled in a long time ago but GOP particularly is so class biased it is pathetic. For example, in the bankruptcy reform bill, the poor schmuck debtor has to get credit counseling. You know, because they are obviously too dumb with their high school education to understand credit. Meanwhile, the dumba** creditor, who made the loan to someone who already had 6 credit cards doesn’t have to go to counseling.
All this mandated by a gov’t who is so dumba** they can’t manage money themselves.
What irks me is not that poor folks come in for criticism, its that the better educated smarmy upper classes don’t get their fair share of the blame.
parsy, who is on his soapbox again
Read the article. Most of the default is not CRA loans.
parsy, who read the article
Read this little snippet, which I think is small enough not to violate any posting requirements:
” When they discovered the low-income borrowers had an unexpected propensity to pay their mortgages. After years of data poured in showing that borrowers were paying mortgages despite high LTVs, low down payments and unconventional income measures, bankers began to believe that many of the traditional measure of credit worthiness were overly conservative.
What they didn’t take into account was that different types of borrowers may behave differently, and that much of the data on those lax lending mortgages was warped by increasing home prices. Wealthier, more sophisticated borrowers ruthlessly default when their mortgage goes underwater, for example. What’s more, the reversal of housing prices meant that defaults across all borrower classes increased.”
Let’s put that into English. The poor folks paid their mortgages and didn’t default. So the richer type bankers assumed other richer folks would behave the same way. But darn if the richer folks just gave back the over-financed properties and told the lenders to “shove it”.
Poor folks paid their bills. Rich folks made bad assumptions. Other rich folks screwed the second group of rich folks. And this is the poor folks fault.
parsy, who is ROTFLMAO over this foolishness
I’m with you. You are hitting the key points, BK reform was Bush’s Waterloo. He let them walk all over him. He and his father, and brother Neil have some sort of familial obsession with letting bankers do just about anything they want, and going along with them for the ride.
I think that family can be conned by anyone wearing a suit and having a title in a bank. The Bush people just don’t compute greed among bankers and lenders, when historically they have been the most greedy of all. That’s why there is a ton of regulations on banking, but a lot of regulation was hand-waved away because of slick political presentations by banker lobbyists.
The result was a wild west environment in banking ethics masked by lies about promoting personal responsibility and creating jobs etc.
And today there has been no investigation nada by Bush or Obama. Selected banks got free money and have used it to buy what they want.
But hey they are slick you know?
Sounds like you're not going to be very happy if the 'cap and trade' energy bill makes it through the Senate then. Everybody expects major energy cost increases from it.
“the evidence is overwhelming that the CRA played a significant role in creating lax lending standards that fueled the housing bubble.”
Duh!
Glad to see another conservative agrees with me. I think a lot of it is just class bias. Sin don’t go away with an increase in income, it just gets more subtle.
Bush ticked me off so bad when he did that I left GOP after 30 years.
parsy, who doesn’t feel so lonely now.
I don’t know. I may become a cap and trade professional so I can get rich.
parsy, who can find loopholes
Please go read the durn article!!! It says right in there the poor folks made their payments! It was the wealthier non-CRA types who defaulted like crazy.
parsy, who knows that freepers can read
Excuse me for commenting on the “parsy thread”!
Trust that I’ll refrain from commenting on any thread that you post on.
No reply necessary, “parsy”
#3:parsy, who ain’t buying this.
#4: parsy, who hates yankee bankers and wall street and excessive coverage of Michael Jackson
#6: parsy, who is on his soapbox again
#13: parsy, who doesn’t feel so lonely now.
#15: parsy, who can find loopholes
#18: parsy, who knows that freepers can read -
I apologize. I didn’t mean to hurt your feelings. I get all wrapped up in this stuff sometimes and with my contrarian viewpoint about economics and I go overboard. Please feel free to say whatever and if I am not forgiven, I promise not to ever bother you again.
parsy, who can be a jerk sometimes
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