Community Reinvestment Act helped cause US economic meltdown
Monday, September 22, 2008 at 12:15PM 
The US Congress is squabbling about how to deal with the economic mess and both parties have pointed the blame finger at each other. Truth is, we’re all to blame in a sense because we the people did nothing, and our Congress did nothing even when it could. So much for the “change” Rep. Nancy Pelosi (D-Calif.) promised almost two years ago when her party assumed control of Congress. No one’s mentioned the Community Reinvestment Act passed in 1977 under a Democratic Congress led by a Democratic president.
This act required depository institutions to “meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound banking operations.” Each institution’s record would be “taken into account in considering an institution's application for deposit facilities, including mergers and acquisitions.” Those quotes are from the Federal Financial Institutions Examination Council. Even as Congress takes up the current economic problem, we taxpayers do not have enough information about the causes or the solutions. I still want to know why a government sponsored entity promoted mortgages for a specific faith.
Lots of talk is going around about regulation. In my opinion, regulation helped put us in this mess. Owning a home is something we earn, not something we are owed.
Now Democrats in Congress want to add an economic stimulus package to the blank check the US Treasury Dept. wants taxpayers to sign. We already did a stimulus package. I didn't agree with that one either. Think about this for a minute. If your kid blows his allowance too fast, do you hand over more? Now is definitely not the time for Dems to tack more pork onto spending. How much fraud occurred here? How much paper is totally worthless, with no possibility of debt satisfaction? Were all these loans written for American citizens? Why did Congress sit on its thumbs for three years? Take a look at our recent column about Freddie Mac—US government sponsored entities tailored loans to satisfy a religion? Good thing it wasn’t Christianity; liberals would’ve had a collective stroke.
The government should cough up as little as possible to deal with this mess. And there should be more disclosure than we’re seeing now. We are not being given the full facts on this mess. We’ve been through an accounting scandal with government sponsored enterprises before, with Fannie Mae. The bill Sen. John McCain co-sponsored with three other Republican senators in 2005 would have helped avert what is happening right now.
The Community Reinvestment Act aimed to help people buy a home and to end discrimination in lending, a laudable goal. But predatory lenders capitalized on those least able to make sound financial decisions. In some cases there may have even been fraud. In other cases, people bought a home when they should have saved money first. Regulation helped to create this mess, another example of government insisting on political manipulation of the economy.
Reader Comments (2)
This is a gross misrepresentation. CRA had nothing to do with the mortgage meltdown. Inf act, the vast majority of the abusive subprime mortgage lending that occured was originated by mortgage companies that are non-depositories and, as a result, are not subject to the CRA. Even the Comptroller of the Currency, no raging progressive by any stretch, has debunked this remarkably ill-conceived and wildly inaccurate myth.
http://news.prnewswire.com/DisplayReleaseContent.aspx?ACCT=ind_focus.story&STORY=/www/story/11-19-2008/0004929211&EDATE=
The securitization industry was driven by a desire to spread risk and maximize profit. It had nothing to do with the desire to comply with the CRA. The CRA was created in 1977. Are you telling me that it took thirty years before reckless CRA compliance finally kicked in?
I have to say, of all the conservative talking points, this is perhaps one of the most irresponsible. It's one thing to be inaccurate. It's another thing to lie.
Back at you. I stand by what I wrote. I am accustomed to liberals ducking the impact of their politicians' acts. Check your history and talk to some actual lenders who were ultimately affected by the CRA.
And don't insult me by using a pr newswire source to prove your case.
The CRA started the ball rolling. Check out newspaper archives and see how community groups pressured lenders for loans that were at best flimsy. Even the source you quote says this: "...six percent of the reported high cost loans made to lower-income borrowers within their CRA assessment areas" were made by banks or purchased by banks subject to CRA and their affiliates You think 6 percent of this meltdown is a small chunk of change? Furthermore, there is no transparency or full accounting of these mortgages.
Most important, dig deep in your brain and actually read what I wrote. I said: the CRA HELPED cause the meltdown. I also included other items in the mix.
And don't call me a liar. If you can't argue your case reasonably and if you can't comprehend what I wrote, go read somewhere else. Your comments are a "gross misrepresentation" of what I wrote.