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I am thoroughtly convinced these people are trying to destroy the economy of the United States. There is no other answer. This is sickening.
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.
His most successful effort was to impose what were called "affordable housing" requirements on Fannie Mae and Freddie Mac in 1992. Before that time, these two government sponsored enterprises (GSEs) had been required to buy only mortgages that institutional investors would buy--in other words, prime mortgages--but Frank and others thought these standards made it too difficult for low income borrowers to buy homes. The affordable housing law required Fannie and Freddie to meet government quotas when they bought loans from banks and other mortgage originators.
At first, this quota was 30%; that is, of all the loans they bought, 30% had to be made to people at or below the median income in their communities. HUD, however, was given authority to administer these quotas, and between 1992 and 2007, the quotas were raised from 30% to 50% under Clinton in 2000 and to 55% under Bush in 2007. Despite Frank's effort to make this seem like a partisan issue, it isn't. The Bush administration was just as guilty of this error as the Clinton administration. And Frank is right to say that he eventually saw his error and corrected it when he got the power to do so in 2007, but by then it was too late.
It is certainly possible to find prime mortgages among borrowers below the median income, but when half or more of the mortgages the GSEs bought had to be made to people below that income level, it was inevitable that underwriting standards had to decline. And they did. By 2000, Fannie was offering no-downpayment loans. By 2002, Fannie and Freddie had bought well over $1 trillion of subprime and other low quality loans. Fannie and Freddie were by far the largest part of this effort, but the FHA, Federal Home Loan Banks, Veterans Administration and other agencies--all under congressional and HUD pressure--followed suit. This continued through the 1990s and 2000s until the housing bubble--created by all this government-backed spending--collapsed in 2007. As a result, in 2008, before the mortgage meltdown that triggered the crisis, there were 27 million subprime and other low quality mortgages in the US financial system. That was half of all mortgages. Of these, over 70% (19.2 million) were on the books of government agencies like Fannie and Freddie, so there is no doubt that the government created the demand for these weak loans; less than 30% (7.8 million) were held or distributed by the banks, which profited from the opportunity created by the government. When these mortgages failed in unprecedented numbers in 2008, driving down housing prices throughout the U.S., they weakened all financial institutions and caused the financial crisis.
Here you can read up on how the CRA's addition to the debacle............
Dude, if you had read my post beyond the first sentence you'd realize that what I had explained, in a nutshell, is how the greed you are talking about caused the crisis AFTER the CRA had shown the banking industry that there was money to be made in securitization and acting as brokers rather than investors, via their experience unloading the unwanted CRA loans.
To be even less abstract, the CRA was the match that started the fire burning - the wood on the other hand was a combination of greed/profit motive (depending on your POV) and the inability of other investors to adequately understand the risks involved and thus proper pricing. And just like in our analogous fire, once all the flammable material is burnt down lighting another match is not going to start another conflagaration.
The concept of securitization through CDOs was birthed from the Savings and Loan crisis not the CRA act.
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."
I would like to see a story from a legitimate outlet, but your response still does not answer the question, where did the CRA force the banks to give out bad loans.
The story is all over the internet. I just grabbed one.
Quote:
The intent was to address redlining, not giving loans to qualified applicants in inner city neighborhoods by local banks. Please explain why the leading amount of defaults were in Nevada and Florida, not in inner city neighborhoods and what part of the CRA "forced" their hand.
When the banks were being responsible in not giving out loans to those who could not afford them they were accused of "redlining" and were threatened and sued by Obama and others under CRA to force them to give out the loans. To save all of these lawsuits and the time they would take the government in a Quid Pro Quo told the banks to give the loans and the government will insure them.
The banks ran with that in giving out loans to anyone for just about anything. Want a $200,000 house on $15,000 of verifiable income? O.K.
Want $7 million to build a shopping plaza out in the middle of no where? O.K.
A estimated 60 percent of the subprime loans were made by non-bank mortgage companies, which are not covered by CRA. 35 percent of loans were made by subsidiaries of banks or thrifts, which are allowed—at their option—to use loans made by these subsidiaries to count toward their CRA rating (but are not making CRA loans).
That is where the quid pro quo I mentioned above came into it's real stride. Anything the government subsidizes (bad loans) will grow and others will jump in to take advantage of it.
Remember, there were government entities put in place to audit these entities. Why wasn't it caught? When it finally crashed, why was no one charged with anything? Why did we instead make sure these banks by and large were made whole again?
His most successful effort was to impose what were called "affordable housing" requirements on Fannie Mae and Freddie Mac in 1992. Before that time, these two government sponsored enterprises (GSEs) had been required to buy only mortgages that institutional investors would buy--in other words, prime mortgages--but Frank and others thought these standards made it too difficult for low income borrowers to buy homes. The affordable housing law required Fannie and Freddie to meet government quotas when they bought loans from banks and other mortgage originators.
At first, this quota was 30%; that is, of all the loans they bought, 30% had to be made to people at or below the median income in their communities. HUD, however, was given authority to administer these quotas, and between 1992 and 2007, the quotas were raised from 30% to 50% under Clinton in 2000 and to 55% under Bush in 2007. Despite Frank's effort to make this seem like a partisan issue, it isn't. The Bush administration was just as guilty of this error as the Clinton administration. And Frank is right to say that he eventually saw his error and corrected it when he got the power to do so in 2007, but by then it was too late.
It is certainly possible to find prime mortgages among borrowers below the median income, but when half or more of the mortgages the GSEs bought had to be made to people below that income level, it was inevitable that underwriting standards had to decline. And they did. By 2000, Fannie was offering no-downpayment loans. By 2002, Fannie and Freddie had bought well over $1 trillion of subprime and other low quality loans. Fannie and Freddie were by far the largest part of this effort, but the FHA, Federal Home Loan Banks, Veterans Administration and other agencies--all under congressional and HUD pressure--followed suit. This continued through the 1990s and 2000s until the housing bubble--created by all this government-backed spending--collapsed in 2007. As a result, in 2008, before the mortgage meltdown that triggered the crisis, there were 27 million subprime and other low quality mortgages in the US financial system. That was half of all mortgages. Of these, over 70% (19.2 million) were on the books of government agencies like Fannie and Freddie, so there is no doubt that the government created the demand for these weak loans; less than 30% (7.8 million) were held or distributed by the banks, which profited from the opportunity created by the government. When these mortgages failed in unprecedented numbers in 2008, driving down housing prices throughout the U.S., they weakened all financial institutions and caused the financial crisis.
Here you can read up on how the CRA's addition to the debacle............
I know, I know it's just another big right wing conspiracy to the government worshipers. Carry on.
First off Fannie and Freddie were a small part of the problem, private financial firms were the issue. Secondly these banks focused on sub-prime mortgages on their own, the rewards were greater. Like I stated, the CRA never required banks to give out bad loans, that was just plain greed. Wells Fargo Settles Mortgage-Crisis Case for $6.5 Million
By BEN PROTESSBradley C. Bower/BloombergElaine C. Greenberg, head of the Securities and Exchange Commission’s Municipal Securities and Public Pensions Unit Wells Fargo on Tuesday settled accusations that it sold troubled mortgage investments without fully researching the products or disclosing the risks to customers.
The action by federal authorities, the latest mortgage-crisis case against a big bank, yielded a $6.5 million settlement. Wells Fargo earned $16 billion last year.
The Securities and Exchange Commission has spent nearly four years building cases against the nation’s biggest banks for their role in the mortgage mess. The agency has filed civil actions against Goldman Sachs, JPMorgan Chase and Citigroup
The story is all over the internet. I just grabbed one.
When the banks were being responsible in not giving out loans to those who could not afford them they were accused of "redlining" and were threatened and sued by Obama and others under CRA to force them to give out the loans. To save all of these lawsuits and the time they would take the government in a Quid Pro Quo told the banks to give the loans and the government will insure them.
The banks ran with that in giving out loans to anyone for just about anything. Want a $200,000 house on $15,000 of verifiable income? O.K.
Want $7 million to build a shopping plaza out in the middle of no where? O.K.
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.
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."
The utter stupidity of elected officials is nothing short of amazing. The people of this country deserve to be unemployed and homeless for voting for morons like this.
Here would be a simple idea...go back to banking regulations like we had in the 80s. Minimum of 20% down, only lend when payments are under a certain percentage of a families income (IIRC, 28-30% of gross income was considered a high payment). Look at credit history and don't lend to people that have proven to be irresponsible and not repay their debts. Quit funding the mortgage industry with the public's money (Fannnie and Freddie) and make banks lend their depositers money.
When another housing bubble blows up because we artificially drive up prices by lending to people who can't make payments, the same liars will blame the banks, rather than the pols decisions.
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