Friday, October 31, 2008

The Community Reinvestment Act

Wow. Right wing media would have us believe that the credit crisis can be blamed on minorities and poor people who couldn’t afford their mortgages (via the “democratic congress who forced banks to make loans to people who couldn’t afford them”). Their basis for this claim is the Community Reinvestment Act which was enacted in 1977 by democratic president Jimmy Carter and was intended to prevent discrimination in mortgage lending and encourage banks to make loans to customers who reside within the community that they operate.

Two of the most glaring problems with trying to blame the CRA:

1.) Only 20-25% of the bad loans behind the crisis were made by depository lending institutions that are subject to CRA. That means that 80% of the subprime mortgages had nothing to do with the CRA.

2.) Banks that were subject to CRA loans were substantially less likely than other lenders to make the high cost, high risk loans that fueled the subprime mess. CRA lenders were more than twice as likely as other lenders to hold originated loans in their portfolio (as opposed to selling them off to Fannie, Freddie, or other mortgage buyers). In fact, CRA loans were generally less risky and less likely to foreclose than other mortgages.

This is just more evidence of the right’s pathological inability and/or unwillingness to correctly identify the true source of a major disaster and hold the appropriate parties/policies accountable.

Some useful information that you won’t hear on Fixed News or talk radio:


Ben There said...

Okay, I realize this isn't a 'real' post but I just got back from vacation and a very long road trip. This was just an email I put together for a friend but it seemed post worthy in my biased but humble opinion.

Anonymous said...

Your biased but humble opinion is OK by me Ben.
Everything that's going on at the moment is only 'tip of the iceberg' stuff mate. Huge changes, way beyond anything we can think of right now, are in the offing.
I think ideologies will have to go on the backburner while we (wtp) all look out for each other (hopefully) for a long while to come.

I used to love long road trips– getting too old for them now. Hope you had a good holiday.

Ben There said...

Hi Tony -

I think you're right about the 'tip of the iceberg' stuff but I tend to stay away from that kind of talk because I don't want to alarm people.

It is long past due for us to spend more time looking out for one another and less time beating eachother up. But alas, we are all human and ego is still there to spoil the party.

Vacation was great, despite the 13 hour drive to and fro.

Always glad to see you stop by.