Larry Blanchard wrote:
On Mon, 17 Nov 2008 21:06:04 -0700, Mark & Juanita wrote:
Reader's Digest Version:
1) The update to the CRA *did* force banks to make loans to people who
they
knew would not be able to pay them back. The penalty would be inability
to merge with other banks, open other branches, and have their CRA rating
degraded. This act was using the force of law to coerce banks into making
loans that they otherwise would not have made.
The URL you gave got me a 404. I even went to the home page and tried
their search - no joy. But if what you quote and they said is true, then
that's certainly part of the cause - I stand corrected.
I just tried it again, it worked:
http://www.city-journal.org/html/10_1_the_trillion_dollar.html
But the lack of regulation for those exotic derivatives also bears much of
the blame. Gramm had a lot to do with that. And don't forget that up to
30% of the mortgages in default are from "flippers" who got low or no down
loans and simply walked away when they got underwater.
Certainly agree that the "flippers" were partly to blame. They were also
taking advantage of the low and no-down terms.
I suspect economists will be arguing for some times about the various
reasons for the meltdown and which of them bears what percent of the
blame.
I did do a google on the CRA and read a few of the articles. One which
I'd like to call to your attention is:
http://mediamatters.org/items/200810100022
I will point out that mediamatters.org is not by any stretch of the
imagination a non-partisan organization being heavily funded by George
Soros.
Here's a couple of quotes:
"A study released earlier this year by a law firm specializing in CRA
compliance estimated that in the 15 most populous metropolitan areas, 84.3
percent of subprime loans in 2006 were made by financial institutions not
governed by the CRA."
That may be the case, but were they using Fannie Mae and Freddie Mac as
their supporting backup?
"More than half of subprime loans were made by independent mortgage
companies not subject to comprehensive federal supervision; another 30
percent of such originations were made by affiliates of banks or thrifts,
which are not subject to routine examination or supervision, and the
remaining 20 percent were made by banks and thrifts."
Does Countrywide fall into that category? If so, then they were certainly
part of the Fannie Mae fiasco. They were making the loans, then bundling
them and selling them as F Mae/F Mac backed.
Obviously neither you or I have the time to fully investigate either your
references or mine. At some point we have to estimate the weight of the
testimonies and the credibility of the testifiers. So far the weight
and credibility seems to me to be on the side of those who claim greed and
lack of regulation were the primary culprits.
From what I've read, the motivation and increasingly loose lending
standards set by Fannie Mae and Freddie Mac were a significant contributor
to the problem. As far as lack of regulation, back as far as 2003 and again
in 2005, the administration attempted to sponsor legislation calling for
tighter regulation of F. Mae and F Mac. The administration was
resoundingly rebuffed by members of congress (Barney Frank, Chuck Schumer,
Chuck Dodd) who all loudly proclaimed that those two institutions were
sound and in no way in trouble, then accused the administration of racism
and being mean to the poor, a charge that was amplified by the media such
that the administration dropped the plans for the legislation. Should the
administration have pushed harder? Probably so, but after daily
accusations of being evil only second to the devil himself, it's not
surprising that the administration picked its battles.
--
If you're going to be dumb, you better be tough