Is attacking CRA wise?
Oct 29th, 2009 by David Anderson
There is an attack on the Community Reinvestment act led by Republicans. It is blamed for everything from collapsing the financial system to the ACORN scandal. Leftwingers say there is no problem and Republicans are racists for having a problem with it.
The left is so far out that even when they raise valid points, conservatives will not listen. If ACORN backers favor it, it must be wrong. It is background noise. It is up to conservatives like myself to raise these questions.
If the CRA were the problem with the subprime mess, then why are some banks like Wells Fargo not burdened down by bad subprime loans while institutions not governed by it were. The changes in the act by the Clinton administration did indeed harm the system. Federal Reserve Chairman Ben Bernanke noted that back in 2007. He said that the CRA does not mean the banks should not differentiate between good and bad loans.
I believe the CRA has been a net benefit to the community. Now that we have tilted our laws against smaller community banks toward big banks, the only way to insure our deposits have at least a small percentage stay in our communities is to make that a condition. Banks with a billion dollars in deposits now account for 88% of the capital available so we no longer have a viable community bank network. We have seen there is a penchant to loan money for mega mergers, debt swaps, and overseas despots because it is easier to make and administrate one loan of five billion dollars than ten thousand loans of fifty thousand dollars. The problem is that our communities suffer from lack of reinvestment which causes dependency on government and welfare. Small businesses suffer. Homeowners suffer. The velocity of money slows and the economic growth which is the basis for a prosperous lifestyle withers away. We become like Britain which allowed its financial sector to siphon its money all over the world. It is one piece of what causes great nations to fall.
The CRA has been responsible for six trillion of investment in American communities. That is success. It has done more for mircobusinesses than the SBA. It has done more for affordable housing than all of the government housing projects. It is the one factor that has kept small farms from becoming endangered species. What is more successful to me is that most of it was done by private decision and not political mandates.
I wish that could be said of all of it, but some has been political payoff. I think some of the Clinton era changes which made the CRA “performance based” and dropping objectivity and allowing regulators to judge the “context” of their performance did cause some pressure to mislend. Then the Mac and Mae pair embraced ways to sell these in combinations. Regardless of that fact the big banking lobby likes the reform because it allows them to move money easier from communities. These problems were not an issue of the original CRA or its mission. Abandoning the CRA would further hallow out our cities and destroy the character of rural America. We should make some reforms, but not abandon it. If we do abandon it, then we should allow Americans the old bankruptcy laws which allowed adjustment of mortgages (changed as a concession when CRA was implemented). We will need it.
My take on CRA is mend it don’t end it. The GOP has abandoned the middle class on several economic issues and sided with big corporations. Sometimes that was right and sometimes it was wrong. This time would be wrong. There is nothing wrong with insuring that financial institutions which get special breaks and guarantees from the taxpayers invest a small amout back in exchange.
I don’t know why you don’t trust big banks to look out for the little guy.
The banks are holding the bailout currency; when it is finally loaned-out, expect it to be at 15-20%- inflation and high interest rates always result when there is excessive money supply. The economic crisis is still in it’s developmental stage; watch and learn.
Well if the economy is going to crash and burn, better that working folks can watch it from their living rooms instead of from under a bridge.
Brilliant. If not for the Community Reinvestment Act, Fannie Mae and Freddie Mac (all government entities), none of this would have ever happened.
Your local bank was blackmailed into making bad loans (including having ACORN thugs ‘protesting’ at bank officials’ homes). Bank regulators ‘graded’ banks by how many bad loans they made (in the perverse world of Democrats, bad loans are ‘good’). Banks that followed the idiotic model of the feds were rewarded by interstate expansion, brokerage rights, etc. As a further incentive, lenders were able (thanks to career parasites like Barney Frank) to pass their near-worthless paper to Fannie Mae, Freddy Mac; in other words, the taxpayers. Yes, brilliant.
I might add that not all, or even most, of the loans were to impoverished minorities; many were for second homes, or homes too large for the applicants’ income. But, who cares about qualifications when the government (taxpayers) get stuck with the bad paper?
Bottom line; Keep the damned government the hell out of it. When will you big-government people learn? Hapless government bureaucrats screw-up everything they touch! Why? Because they have no actual fiduciary interst in the outcome; when they screw-up, who pays for the mistake? Us not them.