It’s the STD of federal regulation, the Jimmy Carter gift that keeps on giving.
“Despite new evidence the Community Reinvestment Act led to riskier lending and played a key role in the subprime mortgage crisis, the Obama administration is broadening the anti-redlining regulation’s authority and scope, spooking bankers.
A recent study by the National Bureau of Economic Research, the nation’s pre-eminent economic research group, states that the CRA “clearly” had a major impact on the flood of subprime loans made in the late 1990s and 2000s, which directly led to the housing crisis.”
Obama fans have been vehemently denying for years that the CRA had anything to do with the housing crisis, despite the fact that it didn’t take more than a second or two of pondering to just know that it probably did. One of the more galling sights during the crisis was seeing some of CRA’s biggest champions being put in charge to “fix” things.
Four more years.
Basically, in economic enterprises there is always a tension between production and protection (see Reason, Managing the Risk of Organizational Accidents). What the CRA did was help tilt the battle towards those who wanted more production, vice more prudent lending, because prudent lending against whites was fine, but prudent lending against African -Americans was going to get you hauled before Congress to be castigated. And you couldn’t have two standards based on race, so….the floodgates opened.
I have long felt that the Obama-type of Progressive is fine with everyone ending up working poor or lower middle class, as long as there is advancement out of poverty for African-Americans. Or the trappings thereof.
Having read the article, I find it hard not to conclude the Justice Department is in fact saying there will be two standards–prudent ones for whites, easy ones for minorities. And that the banks simply must accept the higher default rates. Period.
This is confiscation of the capitol of banks, for a public purpose, without just compensation. They are basically being forced to be urban redevelopment corporations against their will. If this stands, if the government can make anyone sell in a geographic area he does not wish to, can not the government then make in-state firms cross state lines so they may be subject to regulation by the federal government?
Can the government compel a company to compete in an area? Not discriminate in an area it is competing in, but compete in an area? If they can, can they not then dictate locations for factories, etc.? Is not the Tenth Amendment being violated, in the sense of the government yet again forcing people to be part of its social engineering plans with their own time and resources? When the government itself could do these things? The answer is clearly “yes”. The government is forcing firms to make riskier loans in a social engineering effort–this is a taking, and since their as been no just compensation, it is unConstitutional.
Under this “geographic” area rubric, Coors could have been forced to sell its beer east of the Mississippi back when it did not wish to. Simply say “minority”, and that is the end of it. You sell where the government tells you to.
I have truly not been as sick and sure of injustice as I have been when reading this article. The Justice Department doesn’t give a damn about anything but taking somebody else’s money–above and beyond taxes–and giving it to groups they like. It is a protection racket, pure and simple.
I am ashamed to be an American.
cyanide works!!
“Despite new evidence the Community Reinvestment Act led to riskier lending and played a key role in the subprime mortgage crisis”
except the evidence is exactly the opposite of the conclusion you draw here. In reality the CRA loans were much less likely to default than those subprime loans from the private sector. That’s what caused the crisis- idiot bankers who thought they were smarter than everyone else and could create value out of nothing by bundling a bunch of crap investments together and calling them valuable. Then the crap investments went under and took the economy with them.
http://www.ccc.unc.edu/cra.php
http://www.businessweek.com/investing/insights/blog/archives/2008/09/community_reinv.html
http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html
http://www.creditslips.org/creditslips/2012/12/cra-and-the-housing-bubble.html
I know you guys like to pretend that less regulation and more private sector control is always good but the economic crash was a direct result of the fact that your philosophy simply doesn’t work outside the econ 101 classroom. It fails spectacularly when put into real practice an I see no reason to let you try and scape goat minorities for your failure.
This was your screw up, own it and try to learn something from it.