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Kill the Community Reinvestment Act Now!

Posted by rightwinger on December 3, 2008

With all the so-called invesrigations regarding the economic crisis, no one is saying that the Community Reinvestment Act (CRA) is to blame. Its the usual blame Bush scenario. The problem is the root cause of the financial crisis lies in the CRA. If its not addressed and reformed, then our whole financial system is at risk.

The Community Reinvestment Act is to blame for the financial crisis, but it so powerfully serves Democrats’ interests that they’ll do anything to protect it — including revising history.

The CRA coerces banks into making loans based on political correctness, and little else, to people who can’t afford them. Enforced like never before by the Clinton administration, the regulation destroyed credit standards across the mortgage industry, created the subprime market, and caused the housing bubble that has now burst and left us with the worst housing and banking crises since the Great Depression.

The CRA should be abolished, along with the government-sponsored enterprises that fueled the secondary market for subprimes — under pressure from Clinton, who ordered HUD to set quotas for “affirmative action” lending at Fannie Mae and Freddie Mac.

But powerful Democrats in Washington want to protect the act — along with Fannie and Freddie — and spin the subprime scandal as the result of too little regulation, not too much.

As we said, Clinton beefed up the CRA and used it to force banks to subsidize poor communities with close to $1 trillion in high-risk loans and other commitments that flouted underwriting rules.

Yet, somehow, these media-driven myths keep getting in the way of actual facts, such as:

Fact: The 1977 law was only lightly enforced until Clinton added teeth to it in 1994 and launched an anti-redlining campaign against banks, led by Ludwig, Housing Secretary Henry Cisneros (and later Andrew Cuomo) and Attorney General Janet Reno that lasted into this decade.

Minority homeownership rates, which had been flat, began a steep rise in 1995, and home prices soon followed, stoked by easier lending. Numerous bank officials complain that they still feel pressured by CRA regulators to make inner-city loans they know are at great risk of defaulting.

Myth: The CRA could not have led to financial Armageddon, because the overwhelming share of subprime mortgages came from lenders that were not banks and not regulated by the CRA.

Fact: Nearly 4 in 10 subprime loans between 2004 and 2007 were made by CRA-covered banks such as Washington Mutual and IndyMac. And that doesn’t include loans made by subprime lenders owned by banks, which were in effect covered by the CRA.

Last year, when the bubble burst, bank subprime loans totaled $142 billion, dwarfing those made by lenders.

What’s more, the biggest subprime lender, Countrywide, while not subject to the law, still came under federal pressure to make risky loans in minority communities.

Clinton created a separate department at HUD to police “fair lending” at Fannie and Freddie and also at lenders like Countrywide, which became Fannie’s biggest client. In 1994, Countrywide became the nation’s first mortgage lender to sign with HUD a “Declaration of Fair Lending Principles and Practices.”

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3 Responses to “Kill the Community Reinvestment Act Now!”

  1. […] partisan politics (what’s the difference? they’re all over-taxing and over-spending), this article on the CRA does bring up some interesting points. Regardless of the administrations who […]

  2. justanotherdave said

    Old Republican lies never die, they just fade away.

    http://blogs.wsj.com/economics/2008/12/03/feds-kroszner-defends-community-reinvestment-act/

  3. rightwinger said

    Its not just CRA, but Fannie Mae cooking the books while the Dems covered for them. Franklin Raines made $90 million knowing full well the books were cooked. Jamie Gorelick made 26 million. Obama was considering her for US Attorney General. Here we have Enron all over again, but since its the Dems its all covered up. Obama’s Chief of Staff he was on the board of Fannie Mae. CRA was an integral part but so was the accounting irregularities. I won’t listen to one Dem until Franklin Raines and Jamie Gorelick are in jail. You hear that, not any corporate CEO, but Fannie Mae’s CEO.

    https://veerright.wordpress.com/2008/10/28/barack-obama-unfit-to-be-president-part-ii/

    Get your facts right, Obamabot!!!

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