Clinton Added Teeth To CRA, Obama Turned Them Into Fangs
By Paul Sperry
Posted 01/24/2013 06:56 PM ET
Despite new evidence the Community Reinvestment Act led to riskier lending and played a key role in the subprime mortgage crisis, the Obama administration is broadening the anti-redlining regulation’s authority and scope, spooking bankers.
A recent study by the National Bureau of Economic Research, the nation’s pre-eminent economic research group, states that the CRA “clearly” had a major impact on the flood of subprime loans made in the late 1990s and 2000s, which directly led to the housing crisis.
Through executive orders, Clinton set strict numerical lending targets for banks in “underserved” neighborhoods, while ordering regulators to crack down on alleged bank redlining.
The new rules for the first time mandated that banks use “innovative” or “flexible underwriting practices.” Compliance required banks to pass a heavily weighted “lending test” or suffer holds on expansion plans.
Still, the Obama administration wants banks to step up approval of such low-income mortgages. And it’s using the CRA to spur more lending, including:
• Forcing banks through threat of prosecution to expand their CRA assessment areas to include inner-city areas blighted by subprime foreclosures, where they are compelled to invest in new brick and mortar.
Many banks, in fact, are under direct federal orders to open new branches or ATMs in high-risk and unprofitable areas of Detroit, St. Louis and other cities hit hardest by the recession.
Here’s a couple of secrets bureaucrats and race-baiters are apparently incapable of understanding: 1.) Businesses need to make $$, and go where the $$ is; 2.) $$ has but one color, “green”. You won’t find a Nordstrom in a poor part of a city because the people who live there can’t afford the merchandize. Grocery and drugstore chains stay out of high crime parts parts of a city because the crime rate means stores there are unlikely to be profitable. Banks don’t care about the skin color of folks to whom they loan $$. They just want the $$ paid back with interest, which is the fee for using the bank’s $$.
We saw in 2008-2009 (and beyond) the fruit of government strong-arming banks into loaning $$ to people who were unlikely to pay the loans back. Not only were the people unable to pay hurt, not only were banks hurt, not only did taxpayers pick up part of the tab (with considerable $$ going “astray”). All that happened. But many people who ordinarily could and would pay got hit by the trifecta of bubble-inflated house prices when making their loans, the precipitate drop in house prices and the economic slump (= prolonged unemployment) of 2008-present.
Why in Hades are the idiot Obamian bureaucrats trying to drag this country down the same road to the predictable destination AGAIN?!!!