On Feb 19, 4:11*pm, F. George McDuffee gmcduf...@mcduffee-
associates.us wrote:
On Thu, 19 Feb 2009 05:19:37 -0800 (PST), "





wrote:
On Feb 19, 3:23 am, F. George McDuffee gmcduf...@mcduffee-
associates.us wrote:
On Wed, 18 Feb 2009 18:38:46 -0600, "Libby wrote:

snip Answering a question after his speech on whether he would have done
anything differently during his tenure as Federal Reserve chairman to
try and prevent the housing bubble, Greenspan said, "I think it would
be desirable to find a way to suppress asset bubbles.

"But I am skeptical that it can be done."

snip
So the answer is to do nothing and watch the economy be driven
over the cliff????
-------------
"

Unka' George [George McDuffee]
-------------------------------------------
Greenspan may have been skeptical of Congress passing any legislation
to suppress asset bubbles. *The housing bubble was at least in part
due to Congress trying to increase the numbers of poor that owned
houses.

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *Dan

=============

I am assuming you are referring to the Community Reinvestment
Act.

For the facts seehttp://en.wikipedia.org/wiki/Community_Reinvestment_Act
andhttp://www.ffiec.gov/cra/http://www.ffiec.gov/cra/examinations.htm

As in so many areas the banks brought this upon themselves by
opening branches in the poorer urban areas, accepting deposits at
these branches, and then telling the residents of these
economically depressed areas to go pound sand when they applied
for mortgages and other credit en bloc, frequently referred to as
"red lining." *The deposits were being transferred out of the
area and invested in other more affluent areas, with the effect
that the already depressed areas were being stripped of capital
and further depressed.

Nothing in the CRA mandated that *ANY* loans had to be made, only
that the people living in the area and depositing their money at
the bank had to have a fair shot at getting a loan, i.e. no
redlining or zip code underwriting. *

What was new was that the applications across all branches of the
banks were being checked, and questions raised when an
application for a loan in one area was refused, but an
application in an other service area, with essentially identical
information such as employment history, current income, etc.
approved. *Even when such arbitrary loan policies were detected,
the only real penalty was the possible refusal to be allowed to
open more branches, which was almost always granted. *

Of course, the institutions were named and shamed by the
community action groups, and it appears in hindsight that banks
are like vampires in several ways including an allergy to
sunlight.

If there are enough deposits in an area to justify the
establishment and maintenance of a branch bank, then it is
reasonable to assume there is enough economic activity in the
area to justify at least some loans using reasonable and accepted
standards and criteria.

The proliferation of the branch banks, and the need for a CRA
were largely the result of an earlier wave of deregulation
limiting branch banking, resulting in the elimination of many
smaller community banks that had serviced these poorer urban
areas for years, much as Wal-Mart and Target eliminate the small
local stores when they move in to a community. *Indeed, much of
the same rationale and excuses are used, even as more of the
community money is being vacuumed up and exported. *When the
small community banks were eliminated, so were the people that
knew the area, knew who was a good credit risk, along with the
good jobs re circulating the money back into the community in
addition to making loans.

In the current context the CRA is simply a wonderful excuse for
the bad underwriting that resulted in huge amount of sub-prime
and alt-a lending that was done, aided and abetted by Freddie and
Fannie. *This is one way those multimillion dollar bonuses for
the bankers were generated -- "just look at all the mortgage
business I generated …" [but not too closely]

Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).- Hide quoted text -

- Show quoted text -

Good discussion George.

And accurate.

TMT