New Study Finds CRA 'Clearly' Did Lead To Risky Lending


New Study Finds CRA ‘Clearly’ Did Lead To Risky Lending
By Paul Sperry
Posted 12/20/2012 06:56 PM ET

Democrats and the media insist the Community Reinvestment Act, the anti-redlining law beefed up by President Clinton, had nothing to do with the subprime mortgage crisis and recession.

But a new study by the respected National Bureau of Economic Research finds, “Yes, it did. We find that adherence to that act led to riskier lending by banks.”

CRA regulations are at the core of Fannie’s and Freddie’s so-called affordable housing mission. In the early 1990s, a Democrat Congress gave HUD the authority to set and enforce (through fines) CRA-grade loan quotas at Fannie and Freddie.

But they had to loosen underwriting standards to do it. And that’s what they did.

Lenders not subject to the CRA, such as subprime giant Countrywide Financial, still fell under its spell. Regulated by HUD, Countrywide and other lenders agreed to sign contracts with the government supporting such lending under threat of being brought under CRA rules.

Housing analysts say the CRA is the central thread running through the subprime scandal — from banks and subprime lenders to Fannie and Freddie to even Wall Street firms that took most of the heat for the crisis.

Obama officials, who are cracking the CRA whip anew against banks, insist the law played no role in the mortgage meltdown.

While the 1977 law was passed 30 years before the crisis, it underwent a major overhaul just 10 years earlier. Starting in 1995, banks were measured on their use of innovative and flexible" lending standards, which included reduced down payments and credit requirements.

Banks that didn’t meet Clinton’s tough new numerical lending targets were denied merger plans, among other penalties. CRA shakedown groups like Acorn held hostage the merger plans of banks like Citibank and Washington Mutual until they pledged more loans to credit-poor minorities (see chart).

Note: I only quoted snippets of the article to be in line with copyright and fair use law/standards. It is longish and worth every second it takes to read the entire article! If you are looking for a must-read for today, this article, IMO, is IT!

Time for the MSM to crank up the Demonization Machine! The LAST thing the Ds and their MSM shills need is for the US public to learn that the housing bubble that burst in 2007-2008 was caused by government over-regulation and activists’ (Pres. Obama being one of those activists!)shake-downs, not under-regulation**!**

Now I need to replenish my stock of exclamation points, “italic” tags and “bold” tags!


Okay, I’ll go ahead and read it, but am I really going to learn anything new?

Read it. Nope.
But do agree w/the commenter who said anyone w/a brain the size of an amoeba could see what was coming. Afterall, doesn’t “Failure” always follow “Government intervetion?”

But no worries. It’ll be Bush’s fault.


I have been saying this since the day banks started closing but the voices that like the “The banks are to blame and should not be bailed out” liked that fairy tale better.

Congress screwed the banks, the banks did not screw the American people.
But Congress is elected by the people and since the people never take any responsibility for the government they choose I guess that is just normal.


Well, I didn’t imply that there would be information that would be new to a conservative person who has been following this mess. But for some one who has not, has relied on the MSM’s narrative or has an Egyptian River problem in facing the fact that the root cause of the mess was government OVER-regulation, I think there’s new information in the article. And for conservatives who have been following the mess, the article provides plenty of coffin nails for the MSM-D narrative.

I wasn’t following political matters much back in the late 70s when CRA was passed. But when Clinton’s people used it to arm-twist banks into awarding loans based on skin color proportions in an area’s population, I knew this mess was the likely outcome. And Obama - who fought in court to shake down banks into lending based on skin color rather than ability to repay - is trying to renew this assault on fiscal sanity!