It seems people cannot accept the fact that CRA loans (even sub prime CRA
loans) performed better than their counterparts at equal risk levels.
No cite ? I post 99% of the time from a droid phone. Its difficult to post links so take the information I laid out in specifics( which is more than you have to offer ) and Google your damn self.
Yea your'e right, allot of people have no idea what actually transpired and your one of them.
People are claiming that the CRA forces banks to give loans to unqualified borrowers.
I would like to see the language in the CRA legislation, or associated regulations, that require banks to give loans to people who are not qualified. I don't believe that such language exists because it is never quoted by the CRA opponents. I suspect that the opposition to the CRA is from racists and/or people who oppose government regulation against discrimination.
If the argument is that regulators are misinterpreting the law or going beyond the law to force banks to give loans to the unqualified, then it is an issue with the interpretation or the enforcement, not the legislation itself. I don't believe that problem is widespread, but if anyone has statistics that doesn't come from a right wing organization that proves regulators frequently abused the law to force banks to provide loans to the unqualified I will reconsider.
Your the one trying to make the point; its your duty to back up your statements
when challenged. I want to see what you got... I want to know its not from a right-wing political porn site (as I know it is).
.... I have googled this stuff and know it pretty well (as have personal, professional experience with this stuff, including being involved in the legislative process that led to the CRA in the 70's and strategic consulting for a sub-prime mortgage originator in 2005) Despite having personal experience with this stuff, I have no shortage of cites to back up my positions; you can't produce ONE.
I suggest that before you make this obnoxious claims that it it "amazes you have few people understand this issue"... that you document your understanding of it. We'll wait for you to make one of those 1% posts that doesn't come from a Droid.
LOL !!! So much for your week attempt at trying to remain objective. You went off the deep end and took the bait. The lenders had no more abillity or power to lower underwriting standards of Govt backed sub-prime mortgages than donald duck.
No, the CRA went largely unnoticed until the early 90's when Barack Obama, acting for ACORN, sued Citibank for discriminating against minorities. Of course at the time even Black owned banks were discriminating against these people because they were risks.
You are missing the point.
You can look up Barrack Obama sues Citibank in Chicago which forced banks to lend money to credit risks. It's all a matter of record and if you genuinely want to see something, as you say, just do some research. No one can spoon feed you.
It seems the left doesn't possess the cognitive abillity to understand the impact of CRA regulations on the lending standards of private and Govt backed institutions.
No, the banks lowered the standards of Govt backed sub-prime loans. How ridiculous.
President Calls for Expanding Opportunities to Home OwnershipJune 17, 2002
President Bush Calls for Expanding Opportunities to Home Ownership
Atlanta, Georgia
But my attitude is, if somebody can't find work and they want to work, we've got to continue to work on expanding the job base. And part of economic security is owning your own home. (Applause.) Part of being a secure America is to encourage homeownership. So somebody can say, this is my home, welcome to my home.
Now, we've got a problem here in America that we have to address. Too many American families, too many minorities do not own a home. There is a home ownership gap in America. The difference between Anglo America and African American and Hispanic home ownership is too big. (Applause.) And we've got to focus the attention on this nation to address this.
And it starts with setting a goal. And so by the year 2010, we must increase minority home owners by at least 5.5 million. In order to close the homeownership gap, we've got to set a big goal for America, and focus our attention and resources on that goal. (Applause.)
<snip>
And what we've got to do is to figure out how to make sure these stories are repeated over and over and over again in America. Three-quarters of white America owns their homes. Less than 50 percent of African Americans are part of the homeownership in America. And less than 50 percent of the Hispanics who live here in this country own their home. And that has got to change for the good of the country. It just does. (Applause.)
And so here are some of the ways to address the issue. First, the single greatest barrier to first time homeownership is a high downpayment. It is really hard for many, many, low income families to make the high downpayment. And so that's why I propose and urge Congress to fully fund the American Dream Downpayment Fund. This will use money, taxpayers' money to help a qualified, low income buyer make a downpayment. And that's important.
One of the barriers to homeownership is the inability to make a downpayment. And if one of the goals is to increase homeownership, it makes sense to help people pay that downpayment. We believe that the amount of money in our budget, fully approved by Congress, will help 40,000 families every year realize the dream of owning a home. (Applause.) Part of the success of Park Place is that the city of Atlanta already does this. And we want to make the plan more robust. We want to make it more full all across America.
Secondly, there is a lack of affordable housing in certain neighborhoods. Too many neighborhoods, especially in inner city America, lack affordable housing units. How can you promote homeownership if people can't afford a home?
And so what I've done is propose what we call a Single Family Affordable Housing Tax Credit, to encourage the development of affordable housing in neighborhoods where housing is scarce. (Applause.) Over five years, the initiative amounts to $2.4 billion in tax credits. And that will help. It will help a lot to build homes where people can -- where when fully implemented, people will be able to say, I own my home.
A third major barrier is the complexity and difficulty of the home buying process. There's a lot of fine print on these forms. And it bothers people, it makes them nervous. And so therefore, what Mel has agreed to do, and Alphonso Jackson has agreed to do is to streamline the process, make the rules simpler, so everybody understands what they are -- makes the closing much less complicated.
We certainly don't want there to be a fine print preventing people from owning their home. We can change the print, and we've got to. We've got to be wise about how we deal with the closing documents and all the regulations, but also wise about how we help people understand what it means to own their home and the obligations and the opportunities.
And so, therefore, education is a critical component of increasing ownership throughout America. Financial education, housing counseling, how to help people understand that there are unscrupulous lenders. And so one of the things we're going to do is we're going to promote education, the education of owning a home, the education of buying a home throughout our society. And we want to fully implement the Section 8 housing program, homeownership program. The program will provide vouchers that first-time home buyers can use to help pay their mortgage or apply to their downpayment.
<snip>
And so these are important initiatives that we can do at the federal government. And the federal government, obviously, has to play an important role, and we will. We will. I mean, when I lay out a goal, I mean it. But we also have got to bring others into the process, most particularly the real estate industry. After all, the real estate industry benefits when people are encouraged to buy homes. It's in their self interest that we encourage people to buy homes. (Applause.)
And so one of the things that I'm going to talk about a little bit today is how to create a sustained commitment by the private sector that will have a powerful impact. First of all, we want to make sure that we help work to expand capital available to buyers, and as I mentioned, overcome the barriers that I've delineated, as well as provide the education component. In other words, this is not just a federal responsibility.
That's why I've challenged the industry leaders all across the country to get after it for this goal, to stay focused, to make sure that we achieve a more secure America, by achieving the goal of 5.5 million new minority home owners. I call it America's home ownership challenge.
And let me talk about some of the progress which we have made to date, as an example for others to follow. First of all, government sponsored corporations that help create our mortgage system -- I introduced two of the leaders here today -- they call those people Fannie May and Freddie Mac, as well as the federal home loan banks, will increase their commitment to minority markets by more than $440 billion. (Applause.) I want to thank Leland and Franklin for that commitment. It's a commitment that conforms to their charters, as well, and also conforms to their hearts.
This means they will purchase more loans made by banks after Americans, Hispanics and other minorities, which will encourage homeownership. Freddie Mac will launch 25 initiatives to eliminate homeownership barriers. Under one of these, consumers with poor credit will be able to get a mortgage with an interest rate that automatically goes down after a period of consistent payments. (Applause.)
Fannie Mae will establish 100 partnerships with faith-based organizations that will provide home buyer education and help increase homeownership for their congregations. I love the partnership.
No dude, CRA "loans" were NOT the issue. AGAIN, CRA having regulatory control over banks to force the lowering of underwriting standards WAS the issue..
....If you want to make the case that CRA played a major role in the crisis, first explain HOW it MADE the banks MAKE loans to people who did not deserve them. I know the CRA bill, and I don't believe it.
LOL !!! So much for your week attempt at trying to remain objective.
You went off the deep end and took the bait.
The lenders had no more abillity or power to lower underwriting standards of Govt backed sub-prime mortgages than donald duck.
Your'e so partisan you have to marginalize your argument and continue to push the manufactured narrative of the left.
Those "eeebil banks". How simplistic could you be ?
Your in the "financial industry" ? Without the fundamental abillity to remain objective ? Do you work for the Govt ?
No, the CRA went largely unnoticed until the early 90's when Barack Obama, acting for ACORN, sued Citibank for discriminating against minorities. Of course at the time even Black owned banks were discriminating against these people because they were risks.
You are missing the point.
You can look up Barrack Obama sues Citibank in Chicago which forced banks to lend money to credit risks. It's all a matter of record and if you genuinely want to see something, as you say, just do some research. No one can spoon feed you.
As I quoted in post #85, at least three posters on this thread claimed that the CRA forced banks to give loans to unqualified borrowers.
I'm not asking about court cases, and their results. I want to see the proof that the CRA forced banks to give loans to unqualified borrowers.
No one can show us the actual legislation or regulation that requires banks to give out loans to unqualified borrowers, yet they can find the time to post long posts with irrelevant assertions.
In 1996, Clinton passed a new set of rules that said:
- if you have a bank in the inner city, the ratio of loans you grant should match the demographics of the area you serve, so if 80% of the residents are black, then 80% of the loans should go to black families. They said do banking the old way, get to know your customers and give loans to the ones with steady jobs and character you trust.
- if you don't meet the requirement, you can sell the bank, or you will not be allowed to open another bank in that state.
Technically, you did not HAVE to grant a loan to anyone, especially if you were ok with the consequences. For a local bank, say a family bank, there were NO consequences, assuming you didn't want to expand.
So the government forced banks to "alter" lending standards to comply with demographic quotas, a decade and a half later the economy crashes due to large-scale default on mortgages, and the two are completely unrelated. And I'm a racist for implying a connection.
I've learned much in this thread.
Until you can show us the actual laws/regulations that forced banks to lower
lending standards you have no credibility.
So the government forced banks to "alter" lending standards to comply with demographic quotas, a decade and a half later the economy crashes due to large-scale default on mortgages, and the two are completely unrelated.
Lehman was big, early supporter of subprime - Los Angeles TimesLehman Bros. was an early and enthusiastic backer of subprime lending. It purchased the mortgages and used pools of the loans to back complex bonds, many of which were sold overseas. Merrill Lynch came onto the scene later.
After the late-1990s meltdown in the subprime securitization business, Lehman stepped in with funds and other services that enabled First Alliance of Irvine to continue business in 1999 and 2000 despite lawsuits filed by state attorneys general, consumer groups and AARP.
A 2003 decision by a Santa Ana federal jury, later upheld on appeal, found Lehman liable for aiding and abetting a carefully scripted First Alliance fraud targeting elderly and financially strapped homeowners. Plaintiffs’ attorneys had focused on internal memos, especially a Lehman due-diligence report that said First Alliance required its employees “to leave your ethics at the door.”
Community Reinvestment Act - Wikipedia, the free encyclopediaSome economists, politicians and other commentators have charged that the CRA contributed in part to the 2008 financial crisis by encouraging banks to make unsafe loans. Others however, including the economists from the Federal Reserve and the FDIC, dispute this contention. The Federal Reserve and the FDIC holds that empirical research has not validated any relationship between the CRA and the 2008 financial crisis.[56][57]
Economist Stan Liebowitz wrote in the New York Post that a strengthening of the CRA in the 1990s encouraged a loosening of lending standards throughout the banking industry. He also charges the Federal Reserve with ignoring the negative impact of the CRA.[51] In a commentary for CNN, Congressman Ron Paul, who serves on the United States House Committee on Financial Services, charged the CRA with "forcing banks to lend to people who normally would be rejected as bad credit risks."[58] In a Wall Street Journal opinion piece, Austrian school economist Russell Roberts wrote that the CRA subsidized low-income housing by pressuring banks to serve poor borrowers and poor regions of the country.[59] Jeffrey A. Miron, a senior lecturer in economics at Harvard University, in an opinion piece for CNN, calls for “getting rid” of Fannie Mae and Freddie Mac, as well as policies like the Community Reinvestment Act that “pressure banks into subprime lending.”[60]
However, others dispute the involvement of the CRA in the crisis. San Francisco Federal Reserve Bank Governor Randall Kroszner has stated that no empirical evidence had been presented to support the claim that "the law pushed banking institutions to undertake high-risk mortgage lending".[56] In a Bank for International Settlements ("BIS") working paper, economist Luci Ellis concluded that "there is no evidence that the Community Reinvestment Act was responsible for encouraging the subprime lending boom and subsequent housing bust," relying partly on evidence that the housing bust has been a largely exurban event.[61] Others have also concluded that the CRA did not contribute to the current financial crisis, for example, FDIC Chairman Sheila Bair,[62] Comptroller of the Currency John C. Dugan,[63] Tim Westrich of the Center for American Progress,[64] Robert Gordon of the American Prospect,[65] Daniel Gross of Slate, and Aaron Pressman from BusinessWeek.[66]
Some legal and financial experts note that CRA regulated loans tend to be safe and profitable, and that subprime excesses came mainly from institutions not regulated by the CRA. In the February 2008 House hearing, law professor Michael S. Barr, a Treasury Department official under President Clinton,[67][34] stated that a Federal Reserve survey showed that affected institutions considered CRA loans profitable and not overly risky. He noted that approximately 50% of the subprime loans were made by independent mortgage companies that were not regulated by the CRA, and another 25% to 30% came from only partially CRA regulated bank subsidiaries and affiliates. Barr noted that institutions fully regulated by CRA made "perhaps one in four" sub-prime loans, and that "the worst and most widespread abuses occurred in the institutions with the least federal oversight".[68] According to Janet L. Yellen, President of the Federal Reserve Bank of San Francisco, independent mortgage companies made risky "high-priced loans" at more than twice the rate of the banks and thrifts; most CRA loans were responsibly made, and were not the higher-priced loans that have contributed to the current crisis.[69] A 2008 study by Traiger & Hinckley LLP, a law firm that counsels financial institutions on CRA compliance, found that CRA regulated institutions were less likely to make subprime loans, and when they did the interest rates were lower. CRA banks were also half as likely to resell the loans.[70] Emre Ergungor of the Federal Reserve Bank of Cleveland found that there was no statistical difference in foreclosure rates between regulated and less-regulated banks, although a local bank presence resulted in fewer foreclosures.[71]
The last few post, especially the one which tries to pin the blame on Bush 10 years after the HUD and CRA initiatives were signed, 8 years after Clinton allowed these loans to be securitized is a great explanation of how Obama could have won twice.
A cancer of ignorance, low intelligence and ideology has metastisized to the point where the dumbest of our electorate now determine our path.
Just the thought that private lending institutions had the regulatory power to first free up massive amounts of credit and second to manipulate Govt backed loans should set off a spark of disbelief at least.
But supposed "educated " people here have embrased the narative of the Liberal Democrats completely. The very simplistic and obviously wrong acusations against Bush, who in 2003 tried to reign in the GSEs massive aquisition of sub-prime debt, and the banks who didn't even hold a marginal amount of sub-prime debt when the house of cards fell.
Over 85% of sub-prime debt wound up on the books of Government Financial Entities.
Links have been posted for you "Hard Truth ".
Your foray into calling posters racist is not without irony though. Its the very trigger that initiated the enforcment of CRA and HUD regulations that nearly collapsed our economy.
I judge people by their actions, not by their skin color. You want to call people racist because you cant argue the merits of your counter position be my guest. Trust me, most Conservatives really could care less if their considered racist for criticizing the policies that brought us to such a perilous point in our countries history.
It been a term used so often without merit that its now lost its denigrating effect.
To make it easier for our anti-CRA posters, I am providing a link to a document summarizing the CRA which includes the modifying legislation over the years. It even addresses criticisms of the CRA, which strangly enough, does not include "forces banks to loan to unqualified borrowers."
This section address the issue of community groups and lawsuits:
"1. In practice, community and local activist groups have often protested the
applications of depository institutions and their holding companies on
CRA grounds in an apparent effort to hold up the transaction until certain
demands are met. On occasion, such protests have caused institutions or
holding companies seeking regulatory approval for a transaction to modify
particular business practices in order to satisfy such groups and/or the
federal bank regulator, or even to agree to provide a protesting group with
financial support for its particular projects. More often, however, the
federal regulators have rejected these sorts of protests and proceeded to
approve an institution’s or a holding company’s application.
2. When federal bank regulators have approved applications notwithstanding
CRA protests, community groups have occasionally sued the regulator to
block the approval. The courts, however, thus far have dismissed these
actions on the ground that CRA protesters suffer no constitutional “injury”
necessary to invoke federal jurisdiction."
The fact of the matter is that the vast majority of CRA subject banks did business PROFITABLY. Yes, if you get to know your customer, look him in the eye, know his job stability, and do your banking the old fashioned way, you can succeed. I never heard of ONE bank that pulled out of the inner city because of CRA. They made money. That is why the CRA did not cause the financial crisis.
Lehman was big, early supporter of subprime - Los Angeles Times
First Alliance was not a bank, therefore not controlled by CRA.
A fairly implemented CRA would not have produced these results. Corporate predatory practices targeting people who were not sophisticated are what caused this.
Community Reinvestment Act - Wikipedia, the free encyclopedia
I also showed proof in post 107 of President Bush's leadership role in 2002, expanding home ownership for minorities. This was led by Bush, and I have shown the proof.
■The CRA requires that each insured depository institution's record in helping meet the credit needs of its entire community be evaluated periodically. That record is taken into account in considering an institution's application for deposit facilities, including mergers and acquisitions. (See CRA Ratings) CRA examinations (see Exam Schedules) are conducted by the federal agencies that are responsible for supervising depository institutions: the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS).
In 1996, Clinton passed a new set of rules that said:
- if you have a bank in the inner city, the ratio of loans you grant should match the demographics of the area you serve, so if 80% of the residents are black, then 80% of the loans should go to black families. They said do banking the old way, get to know your customers and give loans to the ones with steady jobs and character you trust.
- if you don't meet the requirement, you can sell the bank, or you will not be allowed to open another bank in that state.
Technically, you did not HAVE to grant a loan to anyone, especially if you were ok with the consequences. For a local bank, say a family bank, there were NO consequences, assuming you didn't want to expand.
So WaMu.....
Huge bailouts of AIG and BofA.
Its worth noting that among industry leaders WaMu and BofA had very high CRA compliance ratings. So I guess thats just cioncidence and not causality.
The Conservative Origins of the Sub-Prime Mortgage CrisisLarge mortgage finance companies and banks made big bucks on sub-prime loans. Last year, 10 lenders -- Countywide, New Century, Option One, Fremont, Washington Mutual, First Franklin, RFC, Lehman Brothers, WMC Mortgage, and Ameriquest -- accounted for 59 percent of all sub-prime loans, totaling $284 billion.
No cite ? I post 99% of the time from a droid phone. Its difficult to post links so take the information I laid out in specifics( which is more than you have to offer ) and Google your damn self.
Yea your'e right, allot of people have no idea what actually transpired and your one of them.
http://www.nytimes.com/2008/10/03/business/03sec.html?_r=1Many events in Washington, on Wall Street and elsewhere around the country have led to what has been called the most serious financial crisis since the 1930s. But decisions made at a brief meeting on April 28, 2004, explain why the problems could spin out of control. The agency’s failure to follow through on those decisions also explains why Washington regulators did not see what was coming.
On that bright spring afternoon, the five members of the Securities and Exchange Commission met in a basement hearing room to consider an urgent plea by the big investment banks.
They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments.
The five investment banks led the charge, including Goldman Sachs, which was headed by Henry M. Paulson Jr. Two years later, he left to become Treasury secretary.
A lone dissenter — a software consultant and expert on risk management — weighed in from Indiana with a two-page letter to warn the commission that the move was a grave mistake. He never heard back from Washington.
One commissioner, Harvey J. Goldschmid, questioned the staff about the consequences of the proposed exemption. It would only be available for the largest firms, he was reassuringly told — those with assets greater than $5 billion.
“We’ve said these are the big guys,” Mr. Goldschmid said, provoking nervous laughter, “but that means if anything goes wrong, it’s going to be an awfully big mess.”
Mr. Goldschmid, an authority on securities law from Columbia, was a behind-the-scenes adviser in 2002 to Senator Paul S. Sarbanes when he rewrote the nation’s corporate laws after a wave of accounting scandals. “Do we feel secure if there are these drops in capital we really will have investor protection?” Mr. Goldschmid asked. A senior staff member said the commission would hire the best minds, including people with strong quantitative skills to parse the banks’ balance sheets.
Annette L. Nazareth, the head of market regulation, reassured the commission that under the new rules, the companies for the first time could be restricted by the commission from excessively risky activity. She was later appointed a commissioner and served until January 2008.
“I’m very happy to support it,” said Commissioner Roel C. Campos, a former federal prosecutor and owner of a small radio broadcasting company from Houston, who then deadpanned: “And I keep my fingers crossed for the future.”
The proceeding was sparsely attended. None of the major media outlets, including The New York Times, covered it.
After 55 minutes of discussion, which can now be heard on the Web sites of the agency and The Times, the chairman, William H. Donaldson, a veteran Wall Street executive, called for a vote. It was unanimous. The decision, changing what was known as the net capital rule, was completed and published in The Federal Register a few months later.
With that, the five big independent investment firms were unleashed.
In loosening the capital rules, which are supposed to provide a buffer in turbulent times, the agency also decided to rely on the firms’ own computer models for determining the riskiness of investments, essentially outsourcing the job of monitoring risk to the banks themselves.
Over the following months and years, each of the firms would take advantage of the looser rules. At Bear Stearns, the leverage ratio — a measurement of how much the firm was borrowing compared to its total assets — rose sharply, to 33 to 1. In other words, for every dollar in equity, it had $33 of debt. The ratios at the other firms also rose significantly.
The 2004 decision for the first time gave the S.E.C. a window on the banks’ increasingly risky investments in mortgage-related securities.
But the agency never took true advantage of that part of the bargain. The supervisory program under Mr. Cox, who arrived at the agency a year later, was a low priority.
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?