Quick Fact: Hannity falsely suggests Community Reinvestment Act caused financial crisis
On his Fox news show, Hannity falsely suggested the Community Reinvestment Act caused the financial crisis. In fact, experts say the CRA did not contribute to the financial crisis "in any substantive way."
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Hannity falsely suggests Community Reinvestment Act to blame for financial crisis
You're wrong in stating where the problem came from. The problem came from this notion that everybody in America had a right to a house whether they could ever afford to pay their loan back. That's what the Community Reinvestment Act was all about.
Fact: Experts say CRA did not contribute to financial crisis "in any substantive way"
Bernanke: Experience "runs counter to the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties." In a November 25, 2008, letter, Federal Reserve chairman Ben Bernanke stated: "Our own experience with CRA over more than 30 years and recent analysis of available data, including data on subprime loan performance, runs counter to the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties."
Most subprime mortgages not issued by institutions under CRA. In a paper published on the website of the Federal Reserve Bank of San Francisco, Michigan law professor Michael Barr stated that as of 2005: "Only 25 percent of subprime loans were made by banks and thrifts, and the Federal Reserve reports that only six percent of subprime loans were CRA-eligible." Similarly, a 2008 study by a law firm specializing in CRA compliance estimated that in the 15 most populous metropolitan areas, 84.3 percent of subprime loans in 2006 were made by financial institutions not governed by the CRA.
SF Reserve Bank's Yellen: "[S]tudies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households." Janet Yellen, president and CEO of the Federal Reserve Bank of San Francisco, in a March 2008 speech criticized efforts to blame CRA lending for weaknesses in the mortgage market, stating:
There has been a tendency to conflate the current problems in the subprime market with CRA-motivated lending, or with lending to low-income families in general. I believe it is very important to make a distinction between the two. Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans, and studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households. We should not view the current foreclosure trends as justification to abandon the goal of expanding access to credit among low-income households, since access to credit, and the subsequent ability to buy a home, remains one of the most important mechanisms we have to help low-income families build wealth over the long term.
Slate's Gross: "[t]he notion that the Community Reinvestment Act is somehow responsible for poor lending decisions is absurd." In an October 7, 2008, Slate article, Daniel Gross, a business columnist for Newsweek and author of Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation, criticized the notion that affordable housing initiatives caused the financial crisis, writing that "the notion that the Community Reinvestment Act is somehow responsible for poor lending decisions is absurd" and that "lending money to poor people and minorities isn't inherently risky. There's plenty of evidence that in fact it's not that risky at all." Gross further explained, "On the other hand, lending money recklessly to obscenely rich white guys ... can be really risky. In fact, it's even more risky, since they have a lot more borrowing capacity."
I think you're STILL giving him WAAAAY too much credit!
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LOL
St Ronald of Reagan's claim to fame was the commencement of the dismantling of elements of the New Deal that regulated corporate excesses, which lead to the return to the old boom and bust cycle.
These loonies won't be satisfied until they return to the good old days of Calvin Coolidge and Herbert Hoover.
Their arguments always include a minority that is somehow ripping society off. It can be blacks, gays, Hispanics. It doesn't matter, they all have a minority involved.
When these right wing blowhards talk about the CRA, what they won't say , but in reality are saying is, "Those dog gone black people blew the economy up by buying a house they couldn't afford.
Want to know how many sub-prime and alt-a mortgages were made under the CRA by the likes of Country Wide, Ameriquest, Quicken Loans, and other mortgage brokers? It was exactly ZERO, because the CRA only applied to FDIC insured institutions. The only reason these crooks could sell these mortgages was because they had other crooks on Wall Street ready to slap a triple A rating on the packages and sell them a "safe" investments.
They were bundling questionable mortgages (which were aggressively marketed, by the way) into hopelessly complex investment packages, fraudulently rating them AAA, then peddling them to investors all over the world. Meanwhile, they were "betting" on the failure of these same investments through Credit Default Swaps. It was a house of cards waiting for a puff of wind to topple it.
The really tragic part is that the perpetrators of this scam made billions of dollars, and will probably never be held accountable.
The crisis was stoked by people who could afford homes, buying more than they could afford, enabled by reckless lenders peddling attractive (but vicious) ARMs.