The Community Reinvestment Act is remembered and allocated its share of the blame at last

The reason blog reports that:

''twas Wall Street greed what done it, some folks say, when it comes to explaining the spectacular housing meltdown of recent years, which had its roots in a great many astonishingly risky loans.

Other folks suggest that the federal government just may have played something of a role in inducing, even strong-arming, banks to take risks they otherwise would have avoided. Specifically, the Community Reinvestment Act and related policy pressures are pointed to as culprits, part of a government effort to extend home-ownership in lower-income neighborhoods. Now comes a new study from the National Bureau of Economic Research that says, quite bluntly. that the CRA played a major role. In the academic world, mealy-mouthed delivery of even powerful conclusions is the norm, so it's refreshing to see authors Sumit Agarwal, Efraim Benmelech, Nittai Bergman, Amit Seru answer the title's question, "Did the Community Reinvestment Act (CRA) Lead to Risky Lending?," with the clear, "Yes, it did. ... We find that adherence to the act led to riskier lending by banks."'

Do read the whole article at the above link but also remember that I've covered this before:

First in September 2008:

I have wanted to blog about the Community Reinvestment Act (CRA) for some months now but have been cautious of doing so for obvious reasons. However the vitriol being spewed out, by the usual suspects in the left wing media, at the banking community has really pissed me off. So here we go, as Forbes tells us:

"The CRA forces banks to make loans in poor communities, loans that banks may otherwise reject as financially unsound. Under the CRA, banks must convince a set of bureaucracies that they are not engaging in discrimination, a charge that the act encourages any CRA-recognized community group to bring forward. Otherwise, any merger or expansion the banks attempt will likely be denied. But what counts as discrimination?

According to one enforcement agency, "discrimination exists when a lender's underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants." Note that these "arbitrary or outdated criteria" include most of the essentials of responsible lending: income level, income verification, credit history and savings history--the very factors lenders are now being criticized for ignoring."

I know this is not the agreed narrative but it is the truth.

In February 2009:

I have blogged many times about the Community Reinvestment Act and how it was one of the key factors in creating the US housing bubble as well as its effect on UK housing finance. You should read my earlier articles - here, here, here, here (in October 2008) the links to Barack Obama and here the links to UK policy.

I raise the matter today because Christopher Booker in The Telegraph yesterday wrote

"It is all very well for President Obama to vent his anger on all those US bankers who continued to claim billions of dollars in bonuses while expecting Washington to bail them out after the sub-prime mortgage scandal brought the banks to their knees. But conveniently overlooked has been the curious part Mr Obama himself played in the sub-prime debacle.

At the heart of it was a 1995 amendment to the Community Reinvestment Act which legally required banks to lend money to buy homes to millions of poor, mainly black Americans, guaranteed by the two biggest mortgage associations, Fannie Mae and Freddie Mac. And no one campaigned more actively for this change to the law than Mr Obama, as a young but already influential Chicago politician.

It was this Act which, more than anything, helped to create the US housing bubble, well beyond the point where it was obvious that hundreds of thousands of homeowners would be likely to default. And in 2005 no one more actively opposed moves to halt Fannie Mae's reckless guarantees than Senator Obama, as he was by then. As the official records show, no senator received more donations from Fannie Mae than he did (although Hillary Clinton ran him close). Thus no US politician arguably did more to promote the sub-prime disaster than the man now expected to pick up the pieces, Rather like Gordon Brown, really. "

I couldn't have put it better myself and somehow I doubt that this story will get anywhere near the BBC where the Obamamessiah is beyond criticism and will remain so so long as he follows the BBC approved line.

 In March 2009:

'A very interesting article in the New York Times should be read here. It's from 30 September 1999 that's whilst Bill Clinton was President and in the light of the current sub-prime crisis it is quite enlightening:

"In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.'' "

Read the whole article and wonder at how the MSM and especially the BBC have just ignored this angle on the banking crisis. Anyone would think they had an agenda...'

What are the chances of the BBC reporting this analysis? Zero?

The Community Reinvestment Act (reminder)

I have blogged many times about the Community Reinvestment Act and how it was one of the key factors in creating the US housing bubble as well as its effect on UK housing finance. You should read my earlier articles - here, here, here, here (in October 2008) the links to Barack Obama and here the links to UK policy.

I raise the matter today because Christopher Booker in The Telegraph yesterday wrote

"It is all very well for President Obama to vent his anger on all those US bankers who continued to claim billions of dollars in bonuses while expecting Washington to bail them out after the sub-prime mortgage scandal brought the banks to their knees. But conveniently overlooked has been the curious part Mr Obama himself played in the sub-prime debacle.

At the heart of it was a 1995 amendment to the Community Reinvestment Act which legally required banks to lend money to buy homes to millions of poor, mainly black Americans, guaranteed by the two biggest mortgage associations, Fannie Mae and Freddie Mac. And no one campaigned more actively for this change to the law than Mr Obama, as a young but already influential Chicago politician.

It was this Act which, more than anything, helped to create the US housing bubble, well beyond the point where it was obvious that hundreds of thousands of homeowners would be likely to default. And in 2005 no one more actively opposed moves to halt Fannie Mae's reckless guarantees than Senator Obama, as he was by then. As the official records show, no senator received more donations from Fannie Mae than he did (although Hillary Clinton ran him close). Thus no US politician arguably did more to promote the sub-prime disaster than the man now expected to pick up the pieces, Rather like Gordon Brown, really. "

I couldn't have put it better myself and somehow I doubt that this story will get anywhere near the BBC where the Obamamessiah is beyond criticism and will remain so so long as he follows the BBC approved line.

The Community Reinvestment Act

I have wanted to blog about the Community Reinvestment Act (CRA) for some months now but have been cautious of doing so for obvious reasons. However the vitriol being spewed out, by the usual suspects in the left wing media, at the banking community has really pissed me off. So here we go, as Forbes tells us:

"The CRA forces banks to make loans in poor communities, loans that banks may otherwise reject as financially unsound. Under the CRA, banks must convince a set of bureaucracies that they are not engaging in discrimination, a charge that the act encourages any CRA-recognized community group to bring forward. Otherwise, any merger or expansion the banks attempt will likely be denied. But what counts as discrimination?

According to one enforcement agency, "discrimination exists when a lender's underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants." Note that these "arbitrary or outdated criteria" include most of the essentials of responsible lending: income level, income verification, credit history and savings history--the very factors lenders are now being criticized for ignoring."

I know this is not the agreed narrative but it is the truth.

Were the banks to blame or was it someone else?

The accepted narrative is that the US property collapse was the fault of evil and/or stupid banks. The truth is somewhat at variance to this and I have blogged about the Community Reinvestment Act before. However I have also just found this 1999 New York Times article from before the problems hit, lauding the Clinton administration's project - (my emphasis):

'In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

...

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.'

Remember the Community Reinvestment Act and who proposed & passed it and why, the next time you hear the BBC or other left-wing media's version of history. Remember that these media organisations are not unbiased, they have a 'narrative' to push and an agenda to advance.

Barack Obama, ACORN and the Community Reinvestment Act - all in one video!

Please read up on ACORN and the Community Reinvestment Act, there is a lot out there and you won't hear any of it on the BBC or the main US channels as they are supporting Barack Obama.

You could start by reading Melanie Philips' article in The Mail.

You might also care to take a look at this link .

More on the sub-prime crisis

Back in March I blogged about President Bill Clinton's Community Reinvestment Act and its, by design, effect on the US mortgage market. Back then I posted the text of a New York Times article from 30 September 1999 about the reasons for and the predicted effects of this "easing (of) the credit requirements on loans" by instituting a policy that "will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans.".
Today I found elsewhere on the web a .bmp of the New York Times article which I reproduce here...



For more on the Community Reinvestment Act take a read here and remember this information the next time the banks and Republicans are blamed for the banking crisis. This part of the banking crisis is directly attributable to Bill Clinton and his attempts at social engineering.

Googling (update 22)

google.com - Obama ACORN Community Reinvestment Act - this blog is number 2

google.com - obama community reinvestment act - this blog is number 5

google.com - compare and contrast obama and mccain unbiased - this blog is number 2

The Community Reinvestment Act (update)

A very interesting article in the New York Times should be read here. It's from 30 September 1999 that's whilst Bill Clinton was President and in the light of the current sub-prime crisis it is quite enlightening:

"In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.'' "

Read the whole article and wonder at how the MSM and especially the BBC have just ignored this angle on the banking crisis. Anyone would think they had an agenda...


I have blogged before about the Community Reinvestment Act, do take a read - you should find it enlightening.




Many thanks to Theo Spark for the excellent spot.

Confused by Fannie May and Freddie May, the Democrats and their part in the Global depression?

I have covered this story many times before and am staggered that the MSM seem determined to keep this story from the general public. So here is an excellent summary with links of the whole story. Alternatively you could look through my old postings on the Community Reinvestment Act, most illuminating...

The Community Reinvestment Act (reprise)

As a follow-up to this recent post I have found this rather interesting video, do watch it...

The ninety-seventh weekly "No shit, Sherlock" award

This week's winner is the BBC for reporting Lord Turner's comments that

'Financial crisis 'not due to bonuses alone''

Something that the BBC are reluctant to report too often as that would mean examining the role in causing the financial crisis played by their heroes Gordon Brown and Bill Clinton. In Gordon Brown's case by creating a credit bubble so as to fund a massibve expansion in the largely Labour voting public sector and in Bill Clinton's case by extending the scope of the Community Reinvestment Act and approving the Financial Services Modernization Act. Do read up on both of these acts, what you find may surprise you if you believe that it was all the bank's fault.

Anyway for noticing that the Financial crisis was 'not due to bonuses alone'; "No shit, Sherlock"

Protecting the liberal shibboleths

Take a read of Wikipedia's article on the Community Reinvestment Act and ask yourself if the section headed 'Controversies and criticisms' seems fair and balanced or somewhat skewed towards defending the controversial Act?

How the markets really work - the subprime crisis

John Bird and John Fortune explaining the whole sub-prime fiasco back in 2007; too accurate to be funny, do watch it right to the end (from 7:50 it is quite scarily prescient).




How a loan to an "unemployed black man in a string vest" becomes a structured investment vehicle (SIV)


Of course what is missing from this explanation is why the "unemployed black man in a string vest" was being offered a mortgage at all and for that you need to look into the Community Reinvestment Act and there you will find the real culprits...



For a good explanation of how subprime derivatives work take a look at this...

The Community Reinvestment Act - Money for nothing?

Yet another video explaining the link between the housing crash, the banking crisis and the Democratic party. We have to keep plugging away with this because the MSM sure won't.

Gordon Brown's economic "genius" exposed

BrackenWorld exposes Gordon Brown's economic "genius" for what it is. Much of the article reiterates what I have been saying for a while, here are some extracts:

"Not only has he borrowed, he has taxed the rest of us to penury, so the ability of the private sector to finance all these jobs - for it is the private sector who pays - has been diminished. State spending represents an absurd portion of the economy, and this is unsustainable

...

The state was active in forcing irresponsible lending - I have pointed out the Community Reinvestment Act before - if this crisis started in the USA, it started with this piece of legislation from 1977 which forced banks to lend to poor credit risks. "innovative products" were aplauded by the regulators, who were instead focussing on investment advisors' dilligence in form filling. "Access" to credit was the byword of banking regulation under Labour in the UK. If bad debts are the problem (and they aren't particularly) then the Reglator is at least as much to blame.

The idea that the banking and financial system was "unregulated" is just ludicrous.

...

Just as it will be several decades before British Banks return to their pomp of 2007, it will be the work of many years to undo the damage that Brown has wrought on the UK economy. He has overseen a vast bloating of the public sector, which will fight hard to maintain its headcount. Any attempt to reduce the number of Diversity outreach co-ordinators will result in failure, because it suits the Aparatchiks' purpose to fire front line service providors rather than administrators in the long bureaucratic tail. They will do this in order to make the "Tory cuts" charge stick."

Read the rest and then spread the word. Don't let Gordon Brown and the media falsify what happened and who is to blame. Gordon Brown must be made to face up to his many failures and his responsibility for the economic disaster that is yet to fully visit the UK. At some point Gordon Brown must be held to account; could what he has done be classified as treason?

More google results

google.nl (Netherlands) - princess juliana airport - this blog is fourth; after the airport's own site, its Dutch Wikipedia entry and its English Wikipedia entry.

google.co.uk - protruding nipples - this blog is now second; after answers.yahoo.com and before www.embarrassingproblems.com

google.co.uk - lilly allen spoof banal - this blog is number one

google.com - bizarre nipples - this blog is a ridiculously high fifth

google.com - roy alexander porn free tube - this blog is third thanks to this article about a team at Radboud University, Nijmegen, Netherlands who have cracked the Mifare chip that sits at the heart of many of the world's travel cards. I think I have also once mentioned Roy Alexander in a post but ...

tiscali.co.uk - gabby logan fanny - this blog is number one and number two for my article about Fannie Mae being in close proximity to one referencing Gabby Logan and also this one of similar references. I think Tiscali's search algorithms need improving because whoever was searching for gabby logan fanny is unlikely to be satisfied by my articles about Fannie Mae, the Community Reinvestment Act and Barack Obama.