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Posted on 03/29/2008 8:33:45 AM PDT by Aristotelian
As a source of the current subprime mortage mess, economist Larry Kudlow and Wall Street Journal editorial board member Steve Moore point to the Carter-era Community Reinvestment Act (CRA) of 1977, which purported to prevent "redlining" -- that is, the denial of mortgages to minority borrowers -- by pressuring banks to make home loans in "low- and moderate-income neighborhoods."
The two economists, speaking today on Larry Judlow's weekly radio show, noted how the CRA was the creation of the same liberal political establishment that is now blaming banks and Wall Street for the subprime mortgage crisis.
The connection between bad loans and the CRA was noted in an earlier FreeRepublic thread: How government makes things worse Boston Globe ^ | March 9, 2008 | Jeff Jacoby http://www.freerepublic.com/focus/f-news/1982895/posts
The article stated:
The subprime mortgage collapse is another tale of unintended consequences.
The crisis has its roots in the Community Reinvestment Act of 1977, a Carter-era law that purported to prevent "redlining" - denying mortgages to black borrowers - by pressuring banks to make home loans in "low- and moderate-income neighborhoods." Under the act, banks were to be graded on their attentiveness to the "credit needs" of "predominantly minority neighborhoods." The higher a bank's rating, the more likely that regulators would say yes when the bank sought to open a new branch or undertake a merger or acquisition.
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Outstanding post, sir...
Bingo.
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