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The CRA did not require a bank to give a $200K loan on a $15K salary, that was their own decision and they thought they would get their money back. Redlining was a legitimate issue and the reason for the CRA, but it did not require banks to give out bad loans, private bank loans were not insured for the most part.
Once again if CRA was the issue why was that a problem with bad loans in Nevada and Florida, they are not inner city neighborhoods.
There is absolutely no way that they do that without the underlying government guarantee of the loans. You are making generalizations with nothing in the way of verification but your generalizations. "Private bank loans were not insured for the most part"?
Why is it do you think that the government took over billions and billions in bad loans and made tax payers responsible for them?
Many of these loans were written with bogus information because the banks were in a feeding frenzy. You do realize that any loan that is shown to have been fraudulently written is supposed to be placed back on the books of the banks.
These banks are making record profits right now because of the various government programs to see that they are made whole and they are not being required to take these loans and place them back on their books.
Why is that?
I will also note that you did not address any of my other questions.
The CRA did not require a bank to give a $200K loan on a $15K salary, that was their own decision and they thought they would get their money back. Redlining was a legitimate issue and the reason for the CRA, but it did not require banks to give out bad loans, private bank loans were not insured for the most part.
Once again if CRA was the issue why was that a problem with bad loans in Nevada and Florida, they are not inner city neighborhoods.
They did get their money back. They made the mortgage then turned right around and sold it to Fannie. Bingo money back then they sit back and collect the servicing fees from fannie and they have more money to loan out and do the same thing again. I signed my mortgage in my current home in nov '05 and it was sold to fannie in march of '06. What happned to it after that is a secret apparently. I've been trying for the last couple months to find out who actually holds the note and have found nothing.
There is absolutely no way that they do that without the underlying government guarantee of the loans. You are making generalizations with nothing in the way of verification but your generalizations. "Private bank loans were not insured for the most part"?
Why is it do you think that the government took over billions and billions in bad loans and made tax payers responsible for them?
Many of these loans were written with bogus information because the banks were in a feeding frenzy. You do realize that any loan that is shown to have been fraudulently written is supposed to be placed back on the books of the banks.
These banks are making record profits right now because of the various government programs to see that they are made whole and they are not being required to take these loans and place them back on their books.
Why is that?
I will also note that you did not address any of my other questions.
It wasn't the government guarantee, it was the fact that investment banks were desperate to obtain these loans to feed the mortgage derivative market. Merrill Lynch was so desperate that they went out and bought a subprime lender to guarantee a steady stream of mortgages. Why sub-Prime? Because on paper they appeared to supply a larger income stream that could be used to create more attractive CDOs.
Merrill Lynch, like many other banks, became heavily involved in the mortgage-based collateralized debt obligation (CDO) market in the early 2000s. According to an article in Credit magazine, Merrill's rise to be the leader of the CDO market began in 2003 when Christopher Ricciardi brought his CDO team from Credit Suisse First Boston to Merrill.[32] In 2005 Merrill took out advertisements in the back of Derivatives Week magazine, touting the fact that its Global Markets and Investing Group was the "#1 global underwriter of CDOs in 2004".[33] To provide a ready supply of mortgages for the CDOs, Merrill purchased First Franklin Financial Corp., one of the largest subprime lenders in the country, in December 2006.[34]
It wasn't the government guarantee, it was the fact that investment banks were desperate to obtain these loans to feed the mortgage derivative market. Merrill Lynch was so desperate that they went out and bought a subprime lender to guarantee a steady stream of mortgages. Why sub-Prime? Because on paper they appeared to supply a larger income stream that could be used to create more attractive CDOs.
It was both. We know what happened. The government did indeed take on a huge portion of these bad loans and will make taxpayers responsible for them.
You can argue all day that the banks didn't know this would happen but they did. And it did happen.
That was the Quid Pro Quo. The banks provide the loans which were profitable to them and the government guarantee's them. The problem was it all got away from the government.
What is sicking is recycling long disproved memes.
The argument has been discredited time and again, shriveling up almost as soon as it’s exposed to sunlight. But it keeps coming back, mainly because the anti-government narrative gives Republicans a way to deflect allegations that de-regulation allowed Wall Street to run wild. It’s the financial version of Sarah Palin’s new line that “extreme environmentalists” caused the BP oil spill. ...
Defaults were not Concentrated in CRA regions, indeed it was the opposite: if we look at the actual data, we find that “if the CRA was to blame, the housing boom would have been in CRA regions; it would have made places such as Harlem and South Philly and Compton and inner Washington the primary locales of the run up and collapse.” Instead, “what occurred was the exact opposite: The suburbs boomed and busted and went into foreclosure in much greater numbers than inner cities. The tiny suburbs and exurbs of South Florida and California and Las Vegas and Arizona were the big boomtowns, not the low-income regions.”
Not surprisingly given the higher degree of supervision, loans made under the CRA program were made in a more responsible way than other subprime loans. CRA loans carried lower rates than other subprime loans and were less likely to end up securitized into the mortgage-backed securities that have caused so many losses, according to a recent study by the law firm Traiger & Hinckley (PDF file here).
These arguments suffered from a mistaken premise (subprime lending had a modest negative correlation with income, but many subprime loans were used by the middle class to buy expensive houses in the suburbs and exurbs of California and Nevada) and a failure to check their facts (“Only six percent of all the higher-priced loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas, the local geographies that are the primary focus for CRA evaluation purposes.” — Randall Kroszner, former Fed governor appointed by President George W. Bush, in a Federal Reserve study that also found that subprime loan performance was no worse in CRA-covered zip codes than in slightly more affluent zip codes not covered by the CRA.)
In this paper we use a regression discontinuity approach to investigate whether affordable housing policies influenced origination or affected prices of subprime mortgages. We use merged loan-level data on non-prime securitized mortgages with individual- and neighborhood-level data for California and Florida. We find no evidence that lenders increased subprime originations or altered pricing around the discrete eligibility cutoffs for the Government Sponsored Enterprises’ (GSEs) affordable housing goals or the Community Reinvestment Act. Our results indicate that the extensive purchases of risky private-label mortgage-backed securities by the GSEs were not due to affordable housing mandates.
This needs to be copied and posted into every CRA blaming thread. The amount of unmitigated truthiness that gets posted in these is just slightly less pant-on-head stupid than birther threads, so thank you, and others for posting some actual facts.
There are many CRA compliant banks that fared just fine when the housing burst because they didn't make risky sub-prime loans and/or didn't sell mortgages that they held. Also, the impact of the market burst varied from state to state and was far worse in those states with the least amount of regulations on both sub-prime lending and investment banking. Having people from the self-proclaimed party of personal responsibility say that the government made them take unnecessary risk is beyond laughable.
Blaming the CRA, and by extension the poor communities it helps, is not only false, it's crass.
This needs to be copied and posted into every CRA blaming thread. The amount of unmitigated truthiness that gets posted in these is just slightly less pant-on-head stupid than birther threads, so thank you, and others for posting some actual facts.
There are many CRA compliant banks that fared just fine when the housing burst because they didn't make risky sub-prime loans and/or didn't sell mortgages that they held. Also, the impact of the market burst varied from state to state and was far worse in those states with the least amount of regulations on both sub-prime lending and investment banking. Having people from the self-proclaimed party of personal responsibility say that the government made them take unnecessary risk is beyond laughable.
Blaming the CRA, and by extension the poor communities it helps, is not only false, it's crass.
It's like many laws. It's not so much that the law itself is bad. It's that the regulations in them do not get enforced and there are people who will abuse them.
Those like Obama took banks to court under the threat of the CRA whether or not they were truly running afoul of the law. It was easier and cheaper for the banks to just cave than fight the charges especially in areas that would have made them look bad in defending their policies.
Once the government guaranteed the loans there became no reason to even bother.
I am thoroughtly convinced these people are trying to destroy the economy of the United States. There is no other answer. This is sickening.
"Regulation: A leftist movement to pass local "responsible banking ordinances" is sweeping the nation. Now banks will be harassed into making risky loans by city, not just federal, diversity cops.
The two largest cities this week approved laws requiring banks doing business with them to meet race-based quotas for mortgage and small-business lending. They'll also have to stop foreclosures on previous bad loans and vow to open new branches in urban neighborhoods.
New York and Los Angeles officials who voted for the laws say they're trying to "build on the Community Reinvestment Act." This is the same federal banking regulation that fed the subprime bubble by requiring banks to make riskier mortgages in "underserved communities."
Los Angeles Mayor Antonio Villaraigosa, a strong President Obama ally who agrees the CRA's power and scope should be expanded, is expected to sign the ordinance. New York Mayor Michael Bloomberg is likely to veto it, though the city council will be able to override it.
The moves effectively turn local authorities into bank regulators along with the federal government, adding another layer of CRA enforcement and creating additional pressure on banks to make risky loans.
They also create an unnecessary paperwork burden for banks in these large markets. Bank officials now have to regularly report lending data to city contracting agencies, in addition to federal bank regulators (who already post CRA ratings for any city official to see).
This added compliance cost ultimately will be passed on to bank customers. And taxpayers will have to pick up the cost of the new city bureaucracies that will be set up to police bank lending practices.
Still, New York and Los Angeles are joined by several other major cities in passing such social banking laws, including Pittsburgh, Kansas City and Cleveland. In addition, San Diego, Oakland, Seattle, Boston, Austin, Philadelphia and Portland have drafted similar laws."
When government starts demanding businesses adopt ideological policies, then we are in real trouble. This is why some people go into politics, do force their ideological principles down the throats of everyone else.
Yes, it would be great if more people were able to buy a home, but forcing banks to loan them money they will likely be unable to pay back is flat out nutz. This kind of government policy is one of the reasons behind our 2008 economic collapse.
What is sicking is recycling long disproved memes.
It created a pyramid scheme type cancer, and the only way to hide it was to keep expanding the loans to bring in more people from the suburbs, keep people in the mortgage game, and then eventually, one day it all came crashing down.
Those like Obama took banks to court under the threat of the CRA whether or not they were truly running afoul of the law.
Obama representing Buycks-Roberson v. Citibank Fed. Sav. Bank Fair Housing/Lending/Insurance was about RED-LINING and has absolutely NOTHING to do with SUB-PRIME mortgages and had NOTHING to do with The Community Reinvestment Act of 1977 !
Plaintiffs filed their class action lawsuit on July 6, 1994, alleging that Citibank had engaged in redlining practices in the Chicago metropolitan area in violation of the Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691; the Fair Housing Act, 42 U.S.C. 3601-3619; the Thirteenth Amendment to the U.S. Constitution; and 42 U.S.C. 1981, 1982. Plaintiffs alleged that the Defendant-bank rejected loan applications of minority applicants while approving loan applications filed by white applicants with similar financial characteristics and credit histories. Plaintiffs sought injunctive relief, actual damages, and punitive damages.
Ironically the summary above is from a right-wing nutcase blog trying to prove your point.
It was easier and cheaper for the banks to just cave than fight the charges especially in areas that would have made them look bad in defending their policies
.
You supposition, wishful thinks doesn't change the facts as I posted above.
^^^^Your final sentence summed up everything perfectly; The democrats have been on an equality kick for several decades, and when they horrendously misinterpreted that Boston Fed study which showed that African-Americans had the highest rejection rate of any ethnic group for a mortgage (24%, as opposed to 12% for Caucasians and a mere 8% for Asians) they very predictably saw racism, which nobody else did.
When the Feds mandated that the banks make those loans to people who were not qualified to buy a house under any circumstances, in reply to Clinton's exhortations that lenders create 'innovative and creative' methods for folks to qualify for mortgages, the banks gleefully did so because they knew that they'd get bailed out if the loans went south, in spite of barney Frank's preposterous assertions that there were no 'quid pro quo' agreements either implied or in writing that the banks would be reimbursed, which turned out to be a total crock.
The Dodd-Frank Act was the result, as Congress as usual dug up the old CYA strategy so as to create the appearance that they were trying to appearing to do something by attempting to 'fix' a problem which they were responsible for, as was Slick Willie for signing such as idiotic bill.
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