Skip to comments.2011 Flashback - Community Reinvestment Act: Separating Fact From Fiction
Posted on 02/23/2014 4:39:41 PM PST by Son House
FACT: The toothless 1977 regulations fully expired in July 1997, when President Clinton rewrote them to toughen CRA enforcement as part of a crusade to close the "mortgage gap" between blacks and whites.
For the first time, banks were required to show results. One of the five performance criteria in the "lending test" the most heavily weighted component of the CRA exam was adopting "flexible lending practices" to address the credit needs of poor borrowers in "predominantly minority neighborhoods." Banks that didn't bend their underwriting rules risked flunking the exam.
Ex-Federal Reserve Board Gov. Lawrence Lindsey, a staunch CRA defender, acknowledges that the changes "did contribute to a downgrading of credit standards."
Under Clinton's CRA "investment test," moreover, banks for the first time earned CRA credit for purchasing subprime securities. A wave of these securitizations in the secondary mortgage market and on Wall Street began in 1997, which also happened to mark the start of the housing bubble.
Other changes transformed the once-dormant act into a weapon in the hands of Acorn, Greenlining and other shakedown groups who were quick to brand banks with prudent lending requirements as "racist."
Clinton empowered the groups by making their public comments about bank lending in urban areas a key part of CRA evaluations and giving CRA credit to banks that provided them grants and other payola.
FACT: Among other things, the figure does not count the trillions of dollars in CRA "commitments" that WaMu, BofA, JPMorgan Chase, Citibank, Wells Fargo and other large banks pledged to radical inner-city groups like Acorn, Greenlining and Neighborhood Assistance Corp. of America (NACA) after they used the public comment process to protest bank merger applications on CRA grounds.
(Excerpt) Read more at news.investors.com ...
What follow is the Democrat's 'Jobless Recovery', which started July 2009 and continues to this day despite the Stimulus bill, which is ineffective as the Affordable Health Care act, but never gets a mention in the main stream media as the poor judgment/bad decisions legislation it was and is.
Bottom line? this is just one more rat scam that puts a knife in the back of the American people
Problem with the IBD article is it is a typical spin by corporate America to hide their role in the 2008 meltdown. CRA was a stupid approach by Dems to solve discrimination thru social justice to make up past offenses. One does not use a unsustainable financial model to do that. However a mortgage note that is subprime is marked so investors who plan to buy it know that it is not a AAA conventional loan.
Many subprime loans were bundled with good loans into a portfolio and Pres Clinton offer to have Freddie Mac and Fannie Mae buy these portfolios if the note is over 6 months old to mitigate risk to the lenders.
Problem is many bankers discovered that the gov was incompetent and did not thoroughly examine all the loan information before buying them. FMFM was not properly manned to handle the huge volume of notes sold to them. When bankers discovered the government shortfall and inability to review the loans before buying them, the bankers switch the money making strategy to encourage liar loans. The bigger the loan, the bigger the fees and points the bank will earn in the six month period before it was dumped on the gov. These loans were suppose to be AAA conventional loans but applicant info were falsified. One third of the subprime loans failed, but almost all of the liar loans failed. Worst the investor brought the liar loans at a very high price and had it insured against any possible losses by AIG. AIG assumed the liar mortgages were AAA paper thus they charged a low premium to cover any chance the borrower would default. To make matters worst many investors borrowed money to buy these notes figuring that they will increase value in short time and they can make a hefty profit when they sell the notes to another investor with very little money involved. When it implodes the losses multiply and AIG (the largest US insurance company) was almost bankrupted by the losses and needed a gov bailout. Most of the damage was done by liar loans created by the immoral bankers. They hope most Americans will blame it all on the CRA and subprime. CRA was liberal stupidity, but liar loans created by the bankers were downright fraud. Bank officials and workers should have gone to jail for this. Statue of limitation has run out so many of these bankers can walk or settle with gov regulators for a small amount vs the obscene profits made with sealed settlements. The gov pockets the fine, the individual bank officials walk, and the US taxpayer and stockholders pay the damage. White collar crime does pay and some young exec in the middle management today is seeing all this and will decide in the future to pull the same shit again. My old friend once said, never trust an out of town business man, first chance they get they will become a lying sack of shit.
You may be on to something.
I learned this in a training course while working for a large Northeastern bank. In order to stay in compliance, the bank had to prove they were serving 'underserved communities', by lending in those areas. Didn't want to be accused of 'red-lining' or discriminating against minority borrowers, you see.
Even now, working at a Credit Union, we have to keep meticulous records of loans applied for, loans denied, and loans closed, to prove we're not denying loans just because of a minority applicant, or the property is in a 'distressed' area. However, we're not required to make loans to people who clearly can't afford to repay them, or on properties that do not meet Federal or secondary market standards. So as long as we have good records, we can meet the requirements.
Yep, Congress set it up to make it possible for investors to privatize the profits, but lay the risks on the Federal Government. Crony capitalism, at it’s very worst.
Thanks Son House.
There is a GOP rep that wants to introduce a law requiring any settlement be public. The gov must state which reg the banker violated and the deal must be reviewed by a judge and withstand the scrutiny of law. Right now both parties settle in secret, no judge involved, no charges are specified only money changes hands. If taken to its logical conclusion, a CEO can kill his sexy secretary in a secret affair, the state DA and CEO can settle in secret with no charges, records sealed and funds exchanged??!!!!
Even the left-leaning Wikipedia had to admit to the facts.Merely Google housing bubble timeline. The list starts with FDR and the FHA.
ONLY governments can create such large artificial bubbles since the Tulip bulb mania.
My first foray into the banking industry.
They were giving $400,000 loans to illegals with no SSN, no bank accounts and a financial history that consisted of 12 check stubs from Jose's Lawn Service with no withholding and documentation from welfare about benefit amounts.
After the biggest bank failure in American history some of the higher ups moved over to another bank in this area.
It is impossible that they didn't not know what was going on .
Yep. The banks said “Uhh..if we lend money to people that don’t pay it back we’ll go out of business”. Feds said “Freddie and Fannie will buy the mortgages from you. You get the fees and the taxpayer bends over...again.”