Friday, October 03, 2008

Important comment on CRA

Just to put it out "front and center," be sure and read the Op-Ed essay by Froma Harrop in today's edition of The Dallas Morning News regarding the Community Reinvestment Act and the current credit crisis.

For this sound analysis, go here. I love the facts of this matter.



Anonymous said...

On October 3, 2008 in an article for the Wall Street Journal, economist Russell Roberts blamed the combined effects of excessive Federal Reserve credit expansion, the CRA, the implied guarantee to Fannie Mae and Freddie Mac, the Taxpayer Relief Act of 1997, and other policies for causing the crisis. He argues that "Fannie and Freddie were part of the CRA story, too. In 1997, Bear Stearns did the first securitization of CRA loans, a $384 million offering guaranteed by Freddie Mac. Over the next 10 months, Bear Stearns issued $1.9 billion of CRA mortgages backed by Fannie or Freddie. Between 2000 and 2002 Fannie Mae securitized $394 billion in CRA loans with $20 billion going to securitized mortgages. By pressuring banks to serve poor borrowers and poor regions of the country, politicians could push for increases in home ownership and urban development without having to commit budgetary dollars. Another political free lunch." .[42]

Larry James said...

Read the DMN article for specifics in terms of numbers and units and percentages. Also, note the key phrase in the WSJ article you quote: "without having to commit budgetary dollars." That has been the way of Washington for the past almost 30 years. The poor are not responsible for the crash. Those who control the money are.

c hand said...

THOMAS SOWELL: Do Facts Matter?

Fact Number One: It was liberal Democrats, led by Sen. Christopher Dodd and Congressman Barney Frank, who for years — including the present year — denied that Fannie Mae and Freddie Mac were taking big risks that could lead to a financial crisis.

It was Sen. Dodd, Congressman Frank, and other liberal Democrats who for years refused requests from the Bush administration to set up an agency to regulate Fannie Mae and Freddie Mac.

It was liberal Democrats, again led by Dodd and Frank, who for years pushed for Fannie Mae and Freddie Mac to go even further in promoting subprime mortgage loans, which are at the heart of today’s financial crisis.

Alan Greenspan warned them four years ago. So did the chairman of the Council of Economic Advisers to the president. So did Bush’s secretary of the Treasury, five years ago.

Yet, today, what are we hearing? That it was the Bush administration “right-wing ideology” of “de-regulation” that set the stage for the financial crisis. Do facts matter?

We also hear that it is the free market that is to blame. But the facts show that it was the government that pressured financial institutions in general to lend to subprime borrowers, with such things as the Community Reinvestment Act and, later, threats of legal action by then Attorney General Janet Reno if the feds did not like the statistics on who was getting loans and who wasn’t.

Is that the free market? Or do facts not matter?

Then there is the question of being against the “greed” of CEOs and for “the people.” Franklin Raines made $90 million while he was head of Fannie Mae and mismanaging that institution into crisis.

Who in Congress defended Franklin Raines? Liberal Democrats, including Maxine Waters and the Congressional Black Caucus, at least one of whom referred to the “lynching” of Raines, as if it was racist to hold him to the same standard as white CEOs.

Even after he was deposed as head of Fannie Mae, Franklin Raines was consulted this year by the Obama campaign for his advice on housing!

Anonymous said...

Thomas Sowell. . .now there is an unbiased guy!

c hand said...

Sowell is of course biased. But this posting was a recounting of facts. Facts that Larry would probably accept. Although he might add "they said they were just trying to help the poor people, so that's all that matters anywho"

Larry James said...

My original post had to do with CRA only. I stand by my first comment, as do all of the bankers I've talked to. The packaging of debt for sale, and potential return, is what led to this mess. Not the actions of low-income Americans. That is a fact based on data from the industry and from my experience here in the city.

c hand said...
This comment has been removed by a blog administrator.
Anonymous said...

c hand, you are a self-centered bigot, nothing more, nothing less. I hope that you are not a Christian, because your language is shameful. Please get your hatred off of this blog!

Larry, I don't think you should tolerate c hand's comments about "racist jew bankers". These comments should be deleted, because they do nothing to promote meaningful discussion and represent the hate-filled bigotry of a very sad person.

c hand said...

Anon 10:54
Take a breath. The phrase "racist jew banker" is implied by the CRA SUPPORTERS, not me. I'm not calling for an attack on anyone(jews, blacks, arminians, the KKK, anyone). The CRA exists because of the underlying assumption that those racist %&#@ bankers want poor people to stay poor. I don't want to demonize or canonize bankers. My belief is that freedom, not coersion, works best.

c hand said...

Larry, as someone who constantly imputs racist motives to others, you should know what is behind CRA.

I would expect more honesty from you than to delete my post without comment. Even if you image racism behind my motives, you know my comment didn't direct racism, it called it out.

Daniel Gray said...

c hand, maybe true, but the way you say things does not indicate you are being neutral and observant. It comes across as if you are saying it or in agreement with it.

Rather than repeat the language, you should say "people who support the CRA have believe that Jews, who dominate the banking industry, are racists who do not want to lend to minorities."

Reframing your statements in the neutral/observant state will go along way in ensuring that you're not misunderstood or construed to be agreeing with such hateful language.

c hand said...

Daniel, agreed. I don't write well and some don't read well.

Why are you silent about this racism when (I know?) you hear these things in your neigborhood.

Daniel Gray said...

Actually, I don't hear low-income residents complaining about certain other ethnic groups denying them loans. I also think it's a false assumption to say that Jews dominate economics -- it's a stereotype, just like how all Asian children are hardworking and studious.

c hand said...

The entire subject of CRA and redlining is driven by racism. Are you saying that when loans aren't made and racism is assumed, no vindictives are thrown at the bank?