there are no CRA mandated loans. that's the problem. go wiki cra, look up the acts own web site, there is nothing about saying you have to loan to poor people in your area. its not even a red herring, its a lie
The CRA mandates that all banking institutions that receive FDIC insurance be evaluated by the relevant banking regulatory agencies to determine if the institution has met the credit needs of its entire community in a manner consistent with safe and sound operations.[2] The CRA does not list specific criteria for evaluating the performance of financial institutions. Rather, the law directs that the evaluation process should accommodate the situation and context of each individual institution. The law also does not require institutions to make high-risk loans that may bring losses to the institution, instead the law emphasizes that an institution's CRA activities should be undertaken in a safe and sound manner.[2][7] There are no specific penalties for non-compliance with the CRA. However, an institution's CRA compliance record is taken into account by the banking regulatory agencies when the institution seeks to expand through merger, acquisition or branching.[6][8] cra wiki
The Community Reinvestment Act is often cited and though may have contributed on a lesser degree, the Act only covers depository institutions and not investment banks or 3rd party mortgage companies like countrywide etc. I do, however, think that certain ties to fannie/freddie and the increase in mandates perpetuated this crisis but is slightly less to blame than the investment banks and their 30 to 1 leverage to create artificial demand.
All those responsible for the crisis should be held accountable, regardless of party affiliation. The crises almost collapsed the U.S. economy and destroyed the lives of thousands of people around the world. Those responsible for oversight like Dodd and Frank are especially culpable. They are presently hiding behind the national distraction called a Presidential Election.
Would "CRA-encouraged loans" be accurate? Same question as before. Without the CRA and other measures to increase subprime lending/borrowing, does the "housing crisis" happen anyways? After reading the Slate article posted by SamFisher in the other thread, it sounded like this subprime market is an "integral" part of the problem, but not the major part of the problem. It sounded like on its own, subprime mortgaging wouldn't have created the financial meltdown, but it did create an environment in which Republican-based market deregulation and lowering of interest rates could and did really screw things up. Is that an appropriate characterization of the problem?
sam has a better grasp of the problem but cra has nothing to do with sub prime is the message i'm trying to get across. they aren't the same and not related. and the fact that the cra existed does not encourage sub prime lending. the cra has been around since the 70's. it was created to make sure banks cater to the entire community but it does not encourage poor lending standards, if anything it discouraged predatory lending.
Most definitely. I forgot the exact number but I heard a report something like 1/3 of mortgages that have gone bust in the last 5 years were on homes used not as primary residences and for investments - i.e. condo flippers, etc. That's just a snapshot and there's more to it than that as the real problem was the disconnection of the risk adn then its multiplication across other platforms...but anyway, it's pretty much impossible for a bunch of foreclosed inner city homes (whose values weren't even that high to begin with) to erase multi-trillions by themselves.
