CRA looking back

Edward Pinto has been very thoroughly discredited (see Barry Ritholtz's Big Picture for a variety of posts and links on the subject)... Moreover, his involvement in the FCIC investigation of the causes of the financial crisis is a breach of ethics. Finally, why would anyone believe that a former Fannie Chief Credit Officer and a guy who's been involved in housing finance throughout his career is in any way impartial? Wallison and Pinto are typical crisis denialists, who are out there to whitewash the banking industry and allow it to go back to business as usual. Blaming CRA is just an attempt at misdirection.
 
Quote from Mav88:

You missed the whole point here, and people with higher risk SHOULD pay more interest as that is exactly how a loan market works. What the hell are the poor doing taking out home laons anyway?

I said the fingerprints of CRA were not directly on the majority of loans, however CRA clearly was the catalyst that started it in 1994 as well as a force behind it the whole way to 2007. I don't expect the feds to dig very deep into the hows and whys, they are the same people who gave us this mess. The match that lit the rocket was the banks giving in to liberal politicians in 1994 under the political agenda that CRA generated. Later came all the securitization, derivatives, Li algorithm, etc., but that was in response to the original cause.
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If they don't qualify under CRA then they can apply for a subprime loan that carries a higher rate which is what was a major cause of the Panic of '08. These nonCRA loans were what caused the CRA lending banks to collapse.

CRA is subprime but not all subprime was CRA. This is what I think people are confusing.
 
Most subprime lenders weren't subject to federal lending law

The criticisms of the reinvestment act don't make sense to Glenn Hayes. He runs Neighborhood Housing Services of Orange County, which works with banks to provide CRA loans to first-time homebuyers. In its 14-year history, the nonprofit has helped 1,200 families buy their first homes. Score so far: No foreclosures and a delinquency rate under 1 percent.

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CRA did not cause the Panic of '08.

Another read: Did the CRA cause the mortgage market meltdown?
 
About 1998. Remember in May 1997 the tax code was changed. Before that, you could only defer cap gains tax on the sale of principal residence. After that, you could make up to $250,000 single and $500,000 married tax free.
 
I don't know how to say this any different. If you do forensic accounting, of course you cannot find CRA's fingerprints on everything since the prime cause is far removed from final effect in the nonlinear process known as history. The important question to ask is what happened in 1994. Maxine Waters, the Clintons, and all the so called progressives were determined to push banks into lower lending standards. Once the lenders made up their minds under this pressure to start lending subprime, the bottle was uncorked and you didn't even need CRA anymore. Liberals were going to use CRA to bash lenders over their head but it turned out they didn't need to.

All that followed is a result of the original catalyst, and the lending markets being what they are, tried to find a way to make money off the shitty loans they were pushed into in 1994. The plot clearly shows that 1994 was a special year in all this, and now we know what happened in 1994.
 
About 1998. Remember in May 1997 the tax code was changed. Before that, you could only defer cap gains tax on the sale of principal residence. After that, you could make up to $250,000 single and $500,000 married tax free
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Right, fuel for the fire, and so the house flipping began. Enhanced because you could buy with little down which in turn was because lenders were pressured by liberals.
 
Most subprime lenders weren't subject to federal lending law

The criticisms of the reinvestment act don't make sense to Glenn Hayes. He runs Neighborhood Housing Services of Orange County, which works with banks to provide CRA loans to first-time homebuyers. In its 14-year history, the nonprofit has helped 1,200 families buy their first homes. Score so far: No foreclosures and a delinquency rate under 1 percent
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Clinton threatened to extend CRA if banks didn't fall in line, it was a club used to bash banks into subprime. I don't care about your anecdote, it proves nothing.

Later the markets discovered securitization as a response to subprime, and viola, bubbble+meltdown.
 
In 1994, Bill Clinton proposed increasing homeownership through a “partnership” between government and the private sector, principally orchestrated by Fannie Mae, a “government-sponsored enterprise” (GSE). It became a perfect specimen of what such “partnerships” (e.g., General Motors) usually involve: Profits are private, losses are socialized.

There was a torrent of compassion-speak: “Special care should be taken to ensure that standards are appropriate to the economic culture of urban, lower-income, and nontraditional consumers.” “Lack of credit history should not be seen as a negative factor.” Government having decided to dictate behavior that markets discouraged, the traditional relationship between borrowers and lenders was revised. Lenders promoted reckless borrowing, knowing they could offload risk to purchasers of bundled loans, and especially to Fannie Mae. In 1994, subprime lending was $40 billion. In 1995, almost one in five mortgages was subprime. Four years later such lending totaled $160 billion.
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-George Will (July 2011)

But I only want to quote Clinton, and once again point out the housing ownership bubble that started in 1994.

Liberalism is far more effective than war at trashing ones economy.
 
In 1994, Bill Clinton proposed increasing homeownership through a “partnership” between government and the private sector, principally orchestrated by Fannie Mae, a “government-sponsored enterprise” (GSE). It became a perfect specimen of what such “partnerships” (e.g., General Motors) usually involve: Profits are private, losses are socialized.
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Cutting losses and maximizing gains. Isn't that what business is all about?
 
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