“But I’ll bet you a nickel that political pressure to “open up” the lending process played a part, too.”
How right you are:
“Jesse Jackson came to Wall Street two years ago preaching the gospel of economic inclusion and racial diversity. But rather than appealing to the nation’s money men on moral grounds, Jackson is instead invoking their Holy Grail: the bottom line.
As Jackson sees it, it’s good business for Corporate America to invest in the nation’s underserved inner cities and rural communities; to include more women and minorities on their boards; and to cut deals with minority and female-owned advertising, law, money-management and other firms.
It was a theme also sounded by President Clinton, who today addressed the annual conference of Jackson’s Wall Street Project, calling on business leaders to take the lead in investing in the nation’s “new markets” — the poor communities that have been largely bypassed by the nation’s record economic expansion.” (Washington Post, 01/16/99, page E01, by Michael A. Fletcher)
“Sen. Phil Gramm, the new chairman of the Senate Banking Committee, last week proclaimed that the Community Reinvestment Act was resulting in banks being compelled to make ‘kickbacks and bribes’ to [minority] activist groups — a process Mr. Gramm said ‘is little more than extortion.’ Mr. Gramm’s denunciation could open the door to the exposure of some of the worse bureaucratic abuses occurring across the land.”
“The Community Reinvestment Act of 1977 was supposed to prevent banks from taking deposits in one neighborhood and making loans in other neighborhoods. But since President Clinton took office, the federal government has largely ignored the law and instead relied on massive threats against banks to force them to loan more to favored groups. As former Assistant Treasury Secretary Paul Craig Roberts observed, ‘The Justice Department is simply trying to establish by consent decree [also known in the Clinton administration as 'Alternative Dispute Resolution', or ADR] a system of racial quotas in lending regardless of credit risks.” (Washington Times, page A16, by James Bovard, 01/19/99, no link available.)
answering letter to the editor:
The Community Reinvestment Act has worked for homeowners and lenders
What James Bovard calls “shakedowns” in his outrageous attack on the Community Reinvestment Act (“Urban bank loan shakedowns targeted,” Commentary, Jan. 19), is actually the flow of much needed credit to communities long denied by discrimination. The “payoff” dollars he refers to are mortgages for credit-worthy lower-income and minority first-time home buyers . . .”
Another interesting source:
According to the Joint Center for Housing Studies of Harvard University, “Accounting for nearly two-thirds of household growth in 1995 to 2005, minorities contributed 49 percent of the 12.5 million rise in homeowners over the decade.” . . . “Without the sudden expansion of subprime lending, most of these homeowners would have been denied access to credit.”
Subprime growth from $210 billion in 2001 to $625 billion in 2005 represented 20% of the dollar value of loans and 7% of originations of outstanding mortgages. [$35 billion in 1994, $125 billion in 1997]
The Harvard study reports that in 2004 high-income minority communities (more than 50% minority) have about 19% of all mortgages as high-cost mortgages compared to 7% for predominantly white. They have 25% vs. 12% in moderate income communities and 28% to 18% in Low-income areas.(http://www.jchs.harvard.edu/publications/markets/son2006/index.htm)
