[quote=briansd1]Allan, I read the piece you linked and the author provided no data on the default rates of CRA borrowers.
Allan, banks are business people and they wouldn’t implement a business plan that would cost them more money than they can make (unless the individual executives could enrich themselves at the expense of the viability banks).
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Brian: I didn’t claim the article had information regarding minority default rates, I was simply responding to an assertion that you made regarding that minorities DON’T default MORE OFTEN than others.
This is easily rebutted/refuted, as minority rates for default are actually higher. However, the government, in its desire to achieve “fairness”, ascribed banks’ unwillingness to lend to minorities or underserved communities to “discrimination”, rather than the true reason: Creditworthiness. Hence, the creation of CRA, and the enforcement of same.
The idea that this is a benign or even beneficial program (from the banks’ perspective) is utter crap. I know quite a few folks on the community banking side, including quite a few in Los Angeles, and they revile CRA. Moreover, Uncle Sam makes it quite clear that they need to hit their marks regarding “community reinvestment” and loan originations to the “underserved”, so don’t kid yourself that there isn’t any arm twisting going on as far as compliance goes.
This is a piece of enforceable legislation, not a suggested program. While I certainly was not opining that CRA was a primary, motive factor behind what happened, it has certainly contributed, Fed and FDIC protestations to the contrary.
