"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?I know this is not the agreed narrative but it is the truth.
According to one enforcement agency, "discrimination exists when a lender's underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants." Note that these "arbitrary or outdated criteria" include most of the essentials of responsible lending: income level, income verification, credit history and savings history--the very factors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."
Sunday, 21 September 2008
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: