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? RE-Fannie Mae/Freddie Mac & CRA of 1977
The Community Reinvestment Act isn't the sole source of the current financial crisis. It took the government-sponsored entities Fannie Mae and Freddie Mac to supersize the hazards created by the CRA. In 2004 Fannie Mae's federal regulator issued a critical preliminary report on Fannie Mae's accounting policies, financial controls and financial reporting process. I believe it was this report (covered in this Washingoton Post story) that is in part the subject of the instructive House committee hearing highlights video featuring Democratic Reps. Gregory Meeks, Maxine Waters, Lacy Clay and Barney Frank.
Any links or thoughts on this Act and how it played into the current crisis. The fact that these representatives seemed to not want to shore up the practices of these 2 organizations leads me to believe, even more, that our representatives are a big cause in this crisis. It seems like another softball if either candidate wants to take it on, imo, and that candidate needs to hit this and hit this hard if they want to gain ground with it.
Re: ? RE-Fannie Mae/Freddie Mac & CRA of 1977
The CRA is the legislation that forced, excuse me, "encouraged" banks to lend to risky borrowers. Except that if the banks didn't comply with the gov't "encouragement" they found themselves up sh!t's creek if they wanted to merge or acquire another institution, open a new branch, or deal with the FDIC and other gov't regulators. It was the vehicle used to drive the political goal of getting low-income people into homes. This legislation influenced the entire industry's standards, which affected the banks that weren't even under its jurisdiction, b/c where one bank is applauded, rewarded by the gov't, and makes money on risky, securitized loans then others follow.
Your OP summary is right on. It's not the "sole" source of this crisis. There is no sole source. But it is a huge factor.
Here's an econ analysis of it (written in April before this all went down): http://mises.org/story/2963
I don't know it you would argue directly against the bill, but rather against lobbyists that fought to encourage banks to suspend their credit benchmarks that gave people approvals. I believe that when home ownership was pushed to have increased numbers by adding amendments/taking advantage of loopholes/etc, the intention of the Act was altered---that is the area that needs to be addressed, imo.
The same way I can argue against stupid environmental bills without being against "the environment."
The goal of that legislation was to get risky borrowers into homes. Just so happened that minorities were the target market b/c of the high minority populations in low-income, urban areas. The gov't used racially-charged rhetoric to convince people the only reason banks wouldn't lend to low-income borrowers was b/c of racism. That may have been the case in a few limited cases and should have been dealt with as such on a limited basis. But this bill was a sledgehammer to kill a fly. There was no massive redlining based on race. There was massive responsible lending by banks that didn't want to go bankrupt lending to people they knew wouldn't be able to keep solvent. People with bad credit, low incomes, no downpayment and no assets are called "subprime" and they shouldn't be given a loan just b/c the gov't wants to please its special interests. Race should play no part whatsoever in the mortgage process. If the gov't wanted to encourage low-income people to own homes it should have helped create an environment in which low-income people became moderate-income people with savings and a stable job - meaning we could have worked to make them prime.
Caden-I completely agree with you on the above paragraph. That should be the focus when legislation is introduced. I do not feel like this has been the case on any of the pieces of legislation that I have seen in dealing with this housing crisis
You don't have to know the rhetoric from the Carter era. If you read the actual bill and its updates (1995) you will see that it was focused on getting low-income people into homes, not minorities - even though the rhetoric was all about racism. Banks were demonized for loaning to "wealthy neighborhoods" and ignoring poor income areas. What the supporters of this legislation failed to acknowledge was that income is required to pay back loans. It makes no sense for a bank to ignore customers based on race alone (New banks would have made a killing targeting that sector of the market, if that were what was actually happening). But it makes perfect sense for a company, whose business is lending money, to ignore poor areas and poor people. This is a classic case of gov't trying to solve something by treating a symptom and not the problem. The problem is that minorities are over-represented in low-income populations. The problem is not that companies that exist to loan money only wanted to lend it to people who can pay it back. And just like in the medical field, fixing a symptom exacerbates the real, untreated problem. Now we are suffering the effects of that.
I am not sure how the government can create an environment to make sure that low-income people move to moderate-income.
By having fiscal policies that promote economic growth which translates to prosperity for the common good. The poverty rate correlates almost perfectly with economic growth.