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“Clinton Added Teeth To CRA, Obama Turned Them Into Fangs”

GetFitNow provided a link to “Clinton Added Teeth To CRA, Obama Turned Them Into Fangs“:

Census Bureau

The Community Reinvestment Act has led to “riskier lending and played a key role in the subprime mortgage crisis, the Obama administration is broadening the anti-redlining regulation’s authority and scope, spooking bankers.” (From the article suggested by getfitnow.)

I found the part of the article, “spooking bankers,” particularly amusing.

A recent study by the National Bureau of Economic Research, the nation’s pre-eminent economic research group, states that the CRA “clearly” had a major impact on the flood of subprime loans made in the late 1990s and 2000s, which directly led to the housing crisis. (“News.Investors.com“)

GetFitNow provided the link to this article. I hope you enjoy it as much as I have.

  • Judith Wright

    Boy, that chart is very convincing! All that chart shows is the increase in homeownership rate. It says nothing about subprime loans. For most of that increase in the homeownership rate there was not even any or very much subprime lending.

    So the homeownership rate went up from 63% in 1965 to 69% in 2005. Big deal it went up 4% points. That tells you absolutely nothing. It just shows the long-term trend in homeownership in the U.S. and nothing else.

    I know you want to blame government for the bad lending practices of banks and their fraudulent securitization and derivative practices, but the facts don’t really add up to support your conspiracy theory. Business Insider has been notoriously dishonest about the CRA and the housing crisis for many years. They are trying to deflect blame from their Wall Street constituency. Their puff pieces are not only straight-out dishonest, but are very thin in analytical support.

    The truth:

    The main culprits in the crisis were private sector financial institutions that were not subject to the requirements of the CRA. The largest players in subprime lending were private financial firms not subject to the CRA. For example, in 2006 only one of the top 25 subprime lenders was subject to the CRA. Only commercial banks and thrifts or deposit institutions must follow the CRA. About 80% of the subprime lending was done by investment banks and non-bank financial institutions like Country-Wide, New Century Financial Corp. and Ameriquest who were not subject to the CRA.

    “By 2006, CRA institutions made only 22.7% of LMI loans (Low and Moderate Income). Also in 2006, CRA institutions only made 11.7% of all LMI and high cost loans (subprime loans).”

    How also do you explain that a full third of mortgage defaults were on refinanced mortgages, which do no fall under the CRA or that a high percentage of defaulting mortgages were not among low income CRA type borrowers, but in the middle income neighborhoods of Florida, Arizona, California, etc.?

    The CRA does not either encourage or condone bad lending. For those few subprime lenders that did fall under the CRA, there was nothing forcing them to do bad lending. In fact, the default rate for CRA lenders was actually well below that of private non-CRA lenders, as CRA lenders tended to have stricter loan qualifications than the private non-bank financial institutions who did not fall under the CRA who did 80% of the subprime lending. Facts are that CRA loans written by covered institutions clearly outperform subprime loans created by non-covered institutions by orders of magnitude.

    • Hokma

      Inconvenient history.

      The original CRA did not do this.

      But Bill Clinton came into office and completely revamped the CRA – making banks measure up to “performance” (volume) rather than “process” (quality).

      In ’95 Clinton began pushing the securitization of sub-prime mortgages in order to spread the evident risk and conceptually minimize it. This is what began the dramatic increase of about 80% in mortgages.

      To make this work, Clinton forced very low standards for securing these mortgages, encouraged activist groups like ACORN to police the banks, and used his executive powers to strong arm banks to comply (banks that wanted to merge were held back if they did not comply).

      The icing on the cake was the government created Fannie and Freddie which Clinton (and HUD Secretary Andrew Cuomo) used to exponentially expand sub-prime mortgages. HUD forced Fannie and Freddie to impose affirmative action measures to greatly expand the sub-prime mortgage market.

      Commercial banks were strong armed to provide these loans and as a result of the cowboy mentality of the Clinton Administration, arose corrupt mortgage companies like Countrywide and Ameriquest who took advantage of the anything-goes mentality they had.

      By the time GW Bush came to office this was a runaway train and still the Democrats fought against fixing it saying that there was nothing wrong with Fannie and Freddie.

      • Judith Wright

        Your arguments do not make sense. 80% of subprime origination in 2006, the height of the subprime lending craze were by financial institutions that did not even fall under the CRA. The CRA had nothing to do with 80% of the subprime market.

        • Hokma

          PPAA, Lola, etc – If you wish to remain willfully ignorant that is your call. History is history and trying to painfully twist it to meet your ridiculous narrative will not make a difference.

          • Judith Wright

            You have no clue what you are talking about. Go read the objective studies and academic research about the causes of the housing bubble and collapse in America and around the world. It was not driven by poor and low income mortgage borrowers. Far from it. It was not driven by the government, but by greed investment banks, fraudaulent mortgage originators, a Greenspan Fed policy that first suckered everyone in with low interest rates and then brought the hammer down. Or just keep living in your fantasy bubble. The facts just don’t line-up with your conspiracy theories.

            If you can answer this simple question then you may have some credibility.

            What percentage of mortgages that have defaulted over the last 5 years fell under the CRA?

            Go find the answer.

            • Hokma

              In your initial post I assume this is the article you are referring to.

              http://www.newamerica.net/blog/asset-building/2008/no-larry-cra-didn-t-cause-sub-prime-mess-3210

              The article is not factual and is instead twisted facts into falsehoods and for good reason. Ellen Seidman completely and deftly relieves any faults and consequences for Clinton for good reason. She was Special Assistant to the President for Economic Policy from 1993 to 1997.

              And, sport, by the way, an increase in only a few years from 64% to 67% home ownership when it does not coincide with population growth is enormous considering the largest population bubble was the baby boomers and they already had owned homes.

              Regarding companies like Countrywide and Ameriquest who were not traditional lenders were a direct outgrowth of Clinton’s actions.

              You refer to the CRA. That is not an institution and therefore cannot force anything. But Clinton did as I stated. I find it interesting that Seidman tried twisting that fact the other way. Unfortunately the only
              place she can pan handle that garbage is to her own far left kind because news accounts differ.

              Rather than spend your time googling left wing propaganda it would be worth your while to first get acquainted with history and facts.

              • Judith Wright

                Again, why don’t you answer the question:

                “What percentage of mortgages that have defaulted over the last 5 years fell under the CRA?”

                Prove that a big part of the housing crisis was because of defaulting CRA mortgages!

                You are so full of shit.

                “You refer to the CRA. That is not an institution and therefore cannot force anything. But Clinton did as I stated.”

                So mortgage that fell under the CRA during the 1990s Clinton years caused the housing crisis in 2007-2009?

                What a complete crook!

                There was almost no subprime mortgages in the 1990s. Most the the mortgage defaults that caused the mortgage crisis in 2007-2009 were originated in the 2002-2006 time period and about +80% of those did not even fall under the CRA.

                “an increase in only a few years from 64% to 67% home ownership when it does not coincide with population growth”

                A few years? Again you are so full of bullshit. How about 40 years. Read the chart. Population growth? Again, you have problems understanding that chart above.

                From 1965 to today, the overall improvements in home financing options has made owning a house much much easier for everyone. 4% increase over that period, with most of this occuring when there was no subprime mortgages is no big deal.

                • Hokma

                  PPAA, Lola or whatever you call yourself –

                  Rather than address an issue based on history and facts you seem to always come up with these non sequitur responses.

                  Nothing happens in a vacuum and in the case of the mortgage crisis to even consider that this wan invented by Bush or by greedy bankers is pathetically ignorant.

                  When were the mortgages that defaulted you refer to originated?

                  When did these sub-prime mortgages begin to default?

                  Why and when did sub-prime mortgages become so prevalent and why?

                  When did sub-prime mortgages start? How did they start? And under whose orders were they created and pushed?

                  Those are the relevant questions. Not after-the-fact situations.

                  When you want to analyze a problem you go to the root cause and not some systemic outgrowth years later.

                  • Judith Wright

                    I am the only one bringing up facts. You have zero. Again, answer the question:

                    What percentage of mortgages that have defaulted over the last 5 years fell under the CRA?

                    Prove your case… go search your conspiracy conservative analysis.

                    80% or less of subprime mortgages did not even fall under the CRA.

                    “”By 2006, CRA institutions made only 22.7% of LMI loans (Low and Moderate Income). Also in 2006, CRA institutions only made 11.7% of all LMI and high cost loans (subprime loans).”

                    • Hokma

                      Keep talking to yourself because you are the only one it makes sense to. get lost and stop wasting my time with twisted tales.

                    • Guest

                      Quit stalking Judith or you will be reported!!

                    • Guest

                      The irony is Hokma calls people stalkers that disagree with him. Soon he will tell you in a hysterical fit you’re stalking him and he’s gonna shut you down. As you can see he’s very unstable and completely full of shit.

                  • Guest

                    When will you quit stalking people, get a grip and stop stalking or you will be reported and your will be shut down.

              • Guest

                Creepy stalker!

          • roafer

            Stalker!

      • Guest

        Stalker!!
        You better watch out Hokma reports stalkers!

  • getfitnow
  • getfitnow

    This.. They were warned.

    http://www.youtube.com/watch?v=cMnSp4qEXNM

    …and this..They are ignorant.

    http://www.youtube.com/watch?v=IyqYY72PeRM

  • elizabethrc

    Do people finally understand now that Obama is intent upon bringing America to her knees? He may be utterly inept in terms of how business works, but he does know how to destroy systems.That he knows too well.
    As a realtor, I’ve had to deal with these handout government loan programs and I’ve seen how miserably they have failed. Those of us who are just simpleminded, hardworking, clean nose folks are the ones who have and will suffer (even more) with these new regulations.
    For each home which goes into foreclosure, the rest of the homes on that block lose 1% of their value. These programs are bringing all of us down. Sad, given the fact that most of us rely on the equity we build in our homes to help fund out retirement and/or leave something to our children.

  • Dave L.

    This is just a bad as Johnson and his great society, raiding the social security trust fund, and never even intending to pay it back. Aren’t Democrat economic policies wonderful ???

  • HARP2
    • Mark Urbo

      Found it very interesting… Thx

    • HELENK2

      I stole it. it does make you stop and think.

    • DianaLC

      It almost reads like something someone would make up to describe the current state of the country and then claim it was written in 1963.
      Very frightening.

  • Hokma

    To use an Obama line “this is what got into this mess in the first place.”

    The CRA that Jimmy Carter created was to get rid of discriminatory red lining practices which were keeping minorities out of more desirable neighborhoods and from getting mortgages.

    As correctly noted it s was Clinton and his HUD Secretary Andrew Cuomo that escalated CRI and were the ones to come up with subprime loans.

    Obama now “forcing banks through threat of prosecution to expand their CRA assessment areas” is nothing new. This is what happened during Clinton and Obama was one of the lawyers suing banks so he has a history in this.

    It was Clinton that was responsible for the mortgage problem and yet no one – NO ONE – talks about it in any of the fawning media.

    • DianaLC

      The “fawning media” is too busy deciding the new issue of the day so everyone can analyse it. I’m including FOX in this at this point. Where do we have any real media that does research journalism?
      To give another example from teaching research at the freshmen college level. I remember trying desperately to get students to do thorough background research of the research questions they chose. This requirement was made to make sure first that the answer to the question hadn’t already been solved. But the requirement also was in place so they knew how the issue had been addressed in the past so that they could eventually arrive at some conclusion or at their own opinion of the direction they felt the research to arrive at an answer to the question should go.
      Guess which students were the absolute worst researchers. If they had already had too many classes in news writing, the journalism students were the worst. Their belief was that all one had to do to research any issue was find people from different sides of the issue to interview and get some good quotations to patch together a report. Most did not see the value in doing anything other than calling up “experts” and reporting on their opinions.
      Journalists are on deadlines and need to write “news” and they know that few people will read any detailed historical analysis.
      We have an entire world of people whose idea of history doesn’t go back very far–maybe to the last New Year’s celebration at the most.

    • getfitnow

      Re: Cuomo–THIS is why I would never vote for him to be POTUS