A new study
from the widely respected National Bureau of Economic Research released
this week has confirmed beyond question that the left's race-baiting
attacks on the housing market (the Community Reinvestment Act--enacted
under Carter, made shockingly more aggressive under Clinton) is
directly responsible for imploding the housing market and destroying the
economy.
The study painstakingly sorted through failed home loans that caused
the housing market collapse and identified an overwhelming connection
between them and CRA mortgages.
Again, let's review:
-President Bush went to Congress repeatedly for years warning them that Fannie Mae and Freddie Mac were going to destroy the economy (17 times in 2008 alone). Democrats continuously ignored him, shut down his proposals along party lines and continued raiding the institutions for campaign contributions on their way down.
-John McCain also co-sponsored
urgently critical reforms that would have prevented the housing market
collapse, but Democrats shut that down as well, along party lines, and
even openly ridiculed
anyone who suggested reforms were necessary...to protect their
taxpayer-funded campaign contributions as the economy raced
uncontrollably toward the cliff.
-No one was making bad loans to unqualified people until Democrats came along and threatened
to drag banks into court and have them fined and branded as racists if
they didn't go along with the left's Affirmative Action lending
policies...all while federally insuring their losses. Even the New York
Times warned in the late 1990s that Democrats continuing to force banks into lowering their standards would lead to this exact catastrophe.
-Democrats themselves are even on the record personally helping sue
one lender (Citibank) into lowering its lending standards to include
people from extremely poor and unstable areas, which even one of the
left's favorite blatantly partisan "fact-checkers," Snopes, admits (while pretending to 'set the record straight').
-Even The New York Times admitted
that there is "little evidence" of any NO connection between the
"Republican" deregulation measures Democrats blame, like the
Gramm-Bleach-Liley Act (signed into law by a Democrat), and the collapse
of the housing market.
But non-Fox media have spent years deliberately and relentlessly
inoculating people against the facts, training them to mindlessly blame
Bush for being in charge when Democrat policies destroyed the economy.
So here we sit, to this day, still watching Democrats excuse and shrug
off endless economic failures, illegal government takeovers and utter
national bankruptcy with zero accountability.
New Study Finds CRA 'Clearly' Did Lead To Risky Lending
12/20/2012 06:56 PM ET
The War On Banks
Democrats
and the media insist the Community Reinvestment Act, the anti-redlining
law beefed up by President Clinton, had nothing to do with the subprime
mortgage crisis and recession.
But a new study by the respected
National Bureau of Economic Research finds, "Yes, it did. We find that
adherence to that act led to riskier lending by banks."
Added
NBER: "There is a clear pattern of increased defaults for loans made by
these banks in quarters around the (CRA) exam. Moreover, the effects are
larger for loans made within CRA tracts," or predominantly low-income
and minority areas.
To satisfy CRA examiners, "flexible" lending
by large banks rose an average 5% and those loans defaulted about 15%
more often, the 43-page study found.
The strongest link between
CRA lending and defaults took place in the runup to the crisis — 2004 to
2006 — when banks rapidly sold CRA mortgages for securitization by
Fannie Mae and Freddie Mac and Wall Street.
CRA regulations are at
the core of Fannie's and Freddie's so-called affordable housing
mission. In the early 1990s, a Democrat Congress gave HUD the authority
to set and enforce (through fines) CRA-grade loan quotas at Fannie and
Freddie.
It passed a law requiring the government-backed agencies
to "assist insured depository institutions to meet their obligations
under the (CRA)." The goal was to help banks meet lending quotas by
buying their CRA loans.
But they had to loosen underwriting standards to do it. And that's what they did.
"We
want your CRA loans because they help us meet our housing goals,"
Fannie Vice Chair Jamie Gorelick beseeched lenders gathered at a banking
conference in 2000, just after HUD hiked the mortgage giant's
affordable housing quotas to 50% and pressed it to buy more CRA-eligible
loans to help meet those new targets. "We will buy them from your
portfolios or package them into securities."
She described "CRA-friendly products" as mortgages with less than "3% down" and "flexible underwriting."
From 2001-2007, Fannie and Freddie bought roughly half of all CRA home loans, most carrying subprime features.
Lenders
not subject to the CRA, such as subprime giant Countrywide Financial,
still fell under its spell. Regulated by HUD, Countrywide and other
lenders agreed to sign contracts with the government supporting such
lending under threat of being brought under CRA rules.
"Countrywide
can potentially help you meet your CRA goals by offering both whole
loan and mortgage-backed securities that are eligible for CRA credit,"
the lender advertised to banks.
Housing analysts say the CRA is
the central thread running through the subprime scandal — from banks and
subprime lenders to Fannie and Freddie to even Wall Street firms that
took most of the heat for the crisis.
Obama officials, who are cracking the CRA whip anew against banks, insist the law played no role in the mortgage meltdown.
"CRA
loans performed substantially better than subprime loans, and the CRA
has been around for decades," argued senior Justice Department official
Thomas Perez.
While the 1977 law was passed 30 years before the
crisis, it underwent a major overhaul just 10 years earlier. Starting in
1995, banks were measured on their use of innovative and flexible"
lending standards, which included reduced down payments and credit
requirements.
Banks that didn't meet Clinton's tough new numerical
lending targets were denied merger plans, among other penalties. CRA
shakedown groups like Acorn held hostage the merger plans of banks like
Citibank and Washington Mutual until they pledged more loans to
credit-poor minorities (see chart).
WaMu CEO Kerry Killinger has
blamed the CRA for his bank's overexposure to risky loans. He said he
wanted to tighten lending requirements, but "such measures would have
presented other issues such as the company's CRA rating and its
commitment to serving its (low-income and minority) customers and
communities."
Other large banks have reported serious delinquency
rates on CRA home loans. Bank of America's 2009 10-K states: "Our CRA
portfolio comprised 6% of the total residential mortgage balances, but
17% of nonperforming residential mortgage loans."
Under Clinton's revised CRA, moreover, banks for the first time earned CRA credit for purchasing subprime securities.
A wave of these securitizations began in 1997, which also happens to mark the start of the housing bubble.
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