[MiNe 109]

CRA is responsible for the mortgage crisis.

http://www.cjr.org/the_audit/a_commu...ment_act_r.php

Felix Salmon takes John Carney of Clusterstock to task for latching on
to the right-wing effort to blame the housing bubble and financial
crisis (or at least a good part of it) on the Community Reinvestment
Act.. .

I thought we had dispensed with this discredited argument, but Carney
brings it up, so here¹s his smackdown...

Salmon ... says at one point:

"The fact is that the CRA did not encourage banks to extend the kind
of toxic loans which ended up being such an important component of the
financial crisis. Indeed, most of those loans weren¹t made by banks at
all ‹ they were made by unregulated subprime lenders who had no CRA
responsibilities whatsoever..."

Salmon does a good enough job of demolishing Carney¹s argument, but
let¹s see how deep we can bury it.

Barry Ritholtz of The Big Picture goes off on Carney here with a ³CRA
Thought Experiment²:

"In reality, the precise opposite of what a CRA-induced collapse
should have looked like is what occurred. The 345 mortgage brokers that
imploded were non-banks, not covered by the CRA legislation. The vast
majority of CRA covered banks are actually healthy."

Daniel Gross took a whack at the CRA speciousness back in October over
at Slate:

The Community Reinvestment Act applies to depository banks. But many
of the institutions that spurred the massive growth of the subprime
market weren¹t regulated banks. They were outfits such as Argent and
American Home Mortgage, which were generally not regulated by the
Federal Reserve or other entities that monitored compliance with CRA.
These institutions worked hand in glove with Bear Stearns and Lehman
Brothers, entities to which the CRA likewise didn¹t apply. There¹s much
more. As Barry Ritholtz notes..., the CRA didn¹t force mortgage
companies to offer loans for no money down, or to throw underwriting
standards out the window, or to encourage mortgage brokers to
aggressively seek out new markets. Nor did the CRA force the
credit-rating agencies to slap high-grade ratings on packages of
subprime debt.


Here¹s Federal Reserve Governor Elizabeth A. Duke talking to the
American Bankers Association in February, noting that a tiny minority of
loans were under the CRA:

"I would like to dispel the notion that these problems were caused
in any way by Community Reinvestment Act (CRA) lending. The CRA is
designed to promote lending in low- to moderate-income areas; it is not
designed to encourage high-risk lending or poor underwriting. Our
analysis of the data finds no evidence, in fact, that CRA lending is in
any way responsible for the current crisisŠ."

....CRA enforcement was gutted by George W. Bush during the 2000¹s‹aka
³the bubble.² Paul Krugman quotes from the administration¹s new white
paper on financial reform:

"Some have attempted to blame the subprime meltdown and financial
crisis on the CRA and have argued that the CRA must be weakened in order
to restore financial stability. These claims and arguments are without
any logical or evidentiary basis. It is not tenable that the CRA could
suddenly have caused an explosion in bad subprime loans more than 25
years after its enactment. In fact, enforcement of CRA was weakened
during the boom and the worst abuses were made by firms not covered by
CRA."

Aaron Pressman of BusinessWeek had a good roundup back in September of
evidence against a CRA role, and he mentioned the Bush-era laxity...:

"Finally, keep in mind that the Bush administration has been
weakening CRA enforcement and the law¹s reach since the day it took
office. The CRA was at its strongest in the 1990s, under the Clinton
administration, a period when subprime loans performed quite well. It
was only after the Bush administration cut back on CRA enforcement that
problems arose, a timing issue which should stop those blaming the law
dead in their tracks."

--

I hope that's that.

Stephen

[Shhhh! I'm Listening to Reason!]

On Jun 27, 10:31Â*pm, MiNe 109 wrote:
CRA is responsible for the mortgage crisis.

http://www.cjr.org/the_audit/a_commu...ment_act_r.php

Felix Salmon takes John Carney of Clusterstock to task for latching on
to the right-wing effort to blame the housing bubble and financial
crisis (or at least a good part of it) on the Community Reinvestment
Act.. .

I thought we had dispensed with this discredited argument, but Carney
brings it up, so here¹s his smackdown...

Salmon ... says at one point:

Â* Â* "The fact is that the CRA did not encourage banks to extend the kind
of toxic loans which ended up being such an important component of the
financial crisis. Indeed, most of those loans weren¹t made by banks at
all €¹ they were made by unregulated subprime lenders who had no CRA
responsibilities whatsoever..."

Salmon does a good enough job of demolishing Carney¹s argument, but
let¹s see how deep we can bury it.

Barry Ritholtz of The Big Picture goes off on Carney here with a ³CRA
Thought Experiment²:

Â* Â* "In reality, the precise opposite of what a CRA-induced collapse
should have looked like is what occurred. The 345 mortgage brokers that
imploded were non-banks, not covered by the CRA legislation. The vast
majority of CRA covered banks are actually healthy."

Daniel Gross took a whack at the CRA speciousness back in October over
at Slate:

Â* Â* The Community Reinvestment Act applies to depository banks. But many
of the institutions that spurred the massive growth of the subprime
market weren¹t regulated banks. They were outfits such as Argent and
American Home Mortgage, which were generally not regulated by the
Federal Reserve or other entities that monitored compliance with CRA.
These institutions worked hand in glove with Bear Stearns and Lehman
Brothers, entities to which the CRA likewise didn¹t apply. There¹s much
more. As Barry Ritholtz notes..., the CRA didn¹t force mortgage
companies to offer loans for no money down, or to throw underwriting
standards out the window, or to encourage mortgage brokers to
aggressively seek out new markets. Nor did the CRA force the
credit-rating agencies to slap high-grade ratings on packages of
subprime debt.

Here¹s Federal Reserve Governor Elizabeth A. Duke talking to the
American Bankers Association in February, noting that a tiny minority of
loans were under the CRA:

Â* Â* "I would like to dispel the notion that these problems were caused
in any way by Community Reinvestment Act (CRA) lending. The CRA is
designed to promote lending in low- to moderate-income areas; it is not
designed to encourage high-risk lending or poor underwriting. Our
analysis of the data finds no evidence, in fact, that CRA lending is in
any way responsible for the current crisisÅ*."

...CRA enforcement was gutted by George W. Bush during the 2000¹s€¹aka
³the bubble.² Paul Krugman quotes from the administration¹s new white
paper on financial reform:

Â* Â* "Some have attempted to blame the subprime meltdown and financial
crisis on the CRA and have argued that the CRA must be weakened in order
to restore financial stability. These claims and arguments are without
any logical or evidentiary basis. It is not tenable that the CRA could
suddenly have caused an explosion in bad subprime loans more than 25
years after its enactment. In fact, enforcement of CRA was weakened
during the boom and the worst abuses were made by firms not covered by
CRA."

Aaron Pressman of BusinessWeek had a good roundup back in September of
evidence against a CRA role, and he mentioned the Bush-era laxity...:

Â* Â* "Finally, keep in mind that the Bush administration has been
weakening CRA enforcement and the law¹s reach since the day it took
office. The CRA was at its strongest in the 1990s, under the Clinton
administration, a period when subprime loans performed quite well. It
was only after the Bush administration cut back on CRA enforcement that
problems arose, a timing issue which should stop those blaming the law
dead in their tracks."

--

I hope that's that.

I'll wager that 2pid dismisses this by using a right-wing blog.

Any takers?