wonderingNo, it isn't.Tue May 15, 2012 2:04pm220.127.116.11
A convenient scapegoat, but it just isn't true.
"Alleged relation to 2008 financial crisisSee also: Subprime mortgage crisis and Global financial crisis of 2008–2009
Economist Stan Liebowitz wrote in the New York Post that a strengthening of the CRA in the 1990s encouraged a loosening of lending standards throughout the banking industry. He also charges the Federal Reserve with ignoring the negative impact of the CRA. In a commentary for CNN, Congressman Ron Paul, who serves on the United States House Committee on Financial Services, charged the CRA with "forcing banks to lend to people who normally would be rejected as bad credit risks." In a Wall Street Journal opinion piece, Austrian school economist Russell Roberts wrote that the CRA subsidized low-income housing by pressuring banks to serve poor borrowers and poor regions of the country.
However, many others hold that the CRA did not make a significant contribution of the subprime crisis. Nobel laureate Paul Krugman noted in November 2009 that 55% of commercial real estate loans were currently underwater, despite being completely unaffected by the CRA. According to Federal Reserve Governor Randall Kroszner, the claim that "the law pushed banking institutions to undertake high-risk mortgage lending" was contrary to their experience, and that no empirical evidence had been presented to support the claim. In a Bank for International Settlements (BIS) working paper, economist Luci Ellis concluded that "there is no evidence that the Community Reinvestment Act was responsible for encouraging the subprime lending boom and subsequent housing bust", relying partly on evidence that the housing bust has been a largely exurban event. Others have also concluded that the CRA did not contribute to the financial crisis, notably, FDIC Chairman Sheila Bair, Comptroller of the Currency John C. Dugan, Tim Westrich of the Center for American Progress, Robert Gordon of the American Prospect, Ellen Seidman of the New America Foundation, Daniel Gross of Slate, and Aaron Pressman from BusinessWeek.
Legal and financial experts have noted that CRA regulated loans tend to be safe and profitable, and that subprime excesses came mainly from institutions not regulated by the CRA. In the February 2008 House hearing, law professor Michael S. Barr, a Treasury Department official under President Clinton, stated that a Federal Reserve survey showed that affected institutions considered CRA loans profitable and not overly risky. He noted that approximately 50% of the subprime loans were made by independent mortgage companies that were not regulated by the CRA, and another 25% to 30% came from only partially CRA regulated bank subsidiaries and affiliates. Barr noted that institutions fully regulated by CRA made "perhaps one in four" sub-prime loans, and that "the worst and most widespread abuses occurred in the institutions with the least federal oversight". According to Janet L. Yellen, President of the Federal Reserve Bank of San Francisco, independent mortgage companies made risky "high-priced loans" at more than twice the rate of the banks and thrifts; most CRA loans were responsibly made, and were not the higher-priced loans that have contributed to the current crisis. A 2008 study by Traiger & Hinckley LLP, a law firm that counsels financial institutions on CRA compliance, found that CRA regulated institutions were less likely to make subprime loans, and when they did the interest rates were lower. CRA banks were also half as likely to resell the loans. Emre Ergungor of the Federal Reserve Bank of Cleveland found that there was no statistical difference in foreclosure rates between regulated and less-regulated banks, although a local bank presence resulted in fewer foreclosures.
During a 2008 House Committee on Oversight and Government Reform hearing on the role of Fannie Mae and Freddie Mac in the financial crisis, including in relation to the Community Reinvestment Act, asked if the CRA provided the "fuel" for increasing subprime loans, former Fannie Mae CEO Franklin Raines said it might have been a catalyst encouraging bad behavior, but it was difficult to know. Raines also cited information that only a small percentage of risky loans originated as a result of the CRA."
- It's absolutely true wondering Robert, Tue May 15 1:01pmThe image of Janet Reno on national TV is still very clear in my mind---"If you (banks) don't loan per the CRA guidelines, we will hunt you down and prosecute you." Look it up, you can probably find... more
- Legalize, REGULATE & Tax Drugs & our prison system would sT, Tue May 15 5:21pmSHRINK & our financial problems would be INsignificant. PROHIBITION NEVER works & VIOLATES our U.S. CONSTITUTION!
- PRISON POPULATION is CA's financial problem! sT, Tue May 15 4:56pmDRUG WAR WAS ESCALATED BY NIXON & REAGAN & THE REST OF U CONS! THANKS FOR BANKRUPTING OUR STATES & NATION & NOW U WANT TO PIN THE TROUBLES ON THE POOR! MORONS!
- No, it isn't. wondering, Tue May 15 2:04pm
- Wiki!? Really!? Robert, Wed May 16 4:34amC'mon wondering, no matter what your bias, don't be a victim of shoddy research, ok? Look, the math is overwhelming on this issue---no, the relatively small number of absolutely ridiculous loans did... more
- Now try to tell US how bush never BRAGGED about HIS sT, Wed May 16 9:11am"OWNERSHIP SOCIETY!"
- Who is guilty? wondering, Wed May 16 8:49amThe answer would be both. Your article is very misleading right from the get-go, saying that homeownership was "forced" on people who could not afford it. That is simply not true. No one was forced... more
- "both" = convenient for liberals Robert, Wed May 16 9:34amSequence matters wondering. No food and the cat doesn't eat, ok? Does a hungry cat simply choose to eat? Does a homebuyer who can afford a $100,000 home simply refuse to buy a $200,000 home when it's ... more
- Ridiculous wondering, Wed May 16 10:20amI can't believe that you would actually believe what you are saying. There are many things that have contributed to the global recession. One big factor is the global market that has taken jobs... more
- Size matters wondering Robert, Wed May 16 10:52amit's ridiculous only if you ignore the math.
- Whose math? wondering, Fri May 18 6:02amYour math? "Conservatives" math? That you try to place all the blame on "liberals" for a global recession shows your bias and your blindness.
- Let's add it up Robert, Fri May 18 8:02amWell documented math, as in the Congressional Budget Office's math, ok? Now that we got that cleared up, I'm not claiming the housing bubble is the only cause of the current recession. It is... more
- Where is the math? wondering, Fri May 18 10:43amI know it all seems simple to you, but it isn't. It would be easy to pull numbers from here or there and then draw conclusions, but it just isn't that simple. If it makes you sleep better to think... more
- Here ya go Robert, Fri May 18 2:10pmThe Scale Of The Crisis: Trillions In Taxpayer Bailouts The extent of the problems has been so severe that some of the world’s largest financial institutions have collapsed. Others have been bought... more
- Can you show wondering, Fri May 18 2:55pmthat the housing boom and reversal in "various countries" were due to CRA legislation or "social engineering"?
- Oops, forgot Robert, Wed May 16 11:11amfor your edification. http://www.doctorhousingbubble.com/first-ever-global-housing-led-recession-one-out-of-eight-american-mortgage-holders-either-late-or-in-forec
- Greenspan lowered FedDiscountRate to 1% w/bush's nudge & sT, Wed May 16 9:38amTHEN JACKED UP FED DISCOUNT RATE TO MORE THAN 6% in 2006 CAUSING THE HOUSING BUST! QUIT FREAKING IGNORING REALITY, ROBERT!
- Remember when cheney'sBUSH was BRAGGING about his sT, Tue May 15 5:01pm"OWNERSHIP SOCIETY?" CONS ARE SUCH LIARS & DECEIVERS!
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