In hindsight, who is most to blame for the Financial Crisis?

[briansd1]

Allan, I read the piece you linked and the author provided no data on the default rates of CRA borrowers.

By examining the defaulted mortgages, one should be able to determine if a certain loan was a CRA loan. So I think that those who make the case that CRA is the problem should provide data.

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).

If there were incremental costs associated with the CRA, those costs have already been built-in to the program. At worse, it’s like Wal-Mart tolerating shoplifters. And even Wal-Mart makes money off the shoplifters overall, because occasional shoplifters are customers too.

The Act became law in 1977, so don’t you think that good business people had ample time to adjust to it? Come on, even in Russia and China where corruption is endemic, people find ways to make money.

What do you make of the fact that banks can make big profits from micro lending to the poor?

[SK in CV]

[quote=Allan from Fallbrook]Brian: Uh, yeah, regarding CRA:http://www.lewrockwell.com/dilorenzo/dilorenzo125.html

And before you accuse me of any sort of partisanship, that’s Thomas DiLorenzo writing on LewRockwell.com, a decidely non-GOP friendly website.

While SK might attempt to argue that CRA’s intent was to use proper lending guidelines and standards, the exact opposite happened (on a government program! Imagine that!).

Further, I would make a point of checking your math regarding “minority” defaults, especially in lower-middle and lower class neighborhoods. Your take doesn’t square with the facts.[/quote]

First, I don’t think identifying Lee Rockwell as non-GOP friendly really increases his credibility. He’s opposed to most all government, and even moreso government regulations.

Secondly, his claims about the CRE being responsible for the subprime collapse is not borne out by the evidence. Here’s the thing. The CRE only applies to depository lenders. Not non-bank lenders like Countrywide and New Century. In 2006, the biggest year for subprime lending, only 2 or 3 of the largest subprime lenders were depository banks (Wamu and Fremont come to mind, there may have been a 3rd.) Most banks shied away from the subprime market. That market was dominated by non-depository lenders.

While there probably was some loosening of lending standards when the CRE was passed, it was over 20 years later that the securitization of the mortgage market became the rule rather than the exception. The loosening of lending standards was a direct results of lenders not retaining exposure, selling off substantially all of the risk to the mortgage backed securities market.

I think identifying the CRA as the cause of the collapse of that market says a lot more about those making the claim than the market itself. The claim is simply not supported by the evidence.

[SK in CV]

[quote=Allan from Fallbrook]Brian: Uh, yeah, regarding CRA:http://www.lewrockwell.com/dilorenzo/dilorenzo125.html

And before you accuse me of any sort of partisanship, that’s Thomas DiLorenzo writing on LewRockwell.com, a decidely non-GOP friendly website.

While SK might attempt to argue that CRA’s intent was to use proper lending guidelines and standards, the exact opposite happened (on a government program! Imagine that!).

Further, I would make a point of checking your math regarding “minority” defaults, especially in lower-middle and lower class neighborhoods. Your take doesn’t square with the facts.[/quote]

First, I don’t think identifying Lee Rockwell as non-GOP friendly really increases his credibility. He’s opposed to most all government, and even moreso government regulations.

Secondly, his claims about the CRE being responsible for the subprime collapse is not borne out by the evidence. Here’s the thing. The CRE only applies to depository lenders. Not non-bank lenders like Countrywide and New Century. In 2006, the biggest year for subprime lending, only 2 or 3 of the largest subprime lenders were depository banks (Wamu and Fremont come to mind, there may have been a 3rd.) Most banks shied away from the subprime market. That market was dominated by non-depository lenders.

While there probably was some loosening of lending standards when the CRE was passed, it was over 20 years later that the securitization of the mortgage market became the rule rather than the exception. The loosening of lending standards was a direct results of lenders not retaining exposure, selling off substantially all of the risk to the mortgage backed securities market.

I think identifying the CRA as the cause of the collapse of that market says a lot more about those making the claim than the market itself. The claim is simply not supported by the evidence.

[SK in CV]

[quote=Allan from Fallbrook]Brian: Uh, yeah, regarding CRA:http://www.lewrockwell.com/dilorenzo/dilorenzo125.html

And before you accuse me of any sort of partisanship, that’s Thomas DiLorenzo writing on LewRockwell.com, a decidely non-GOP friendly website.

While SK might attempt to argue that CRA’s intent was to use proper lending guidelines and standards, the exact opposite happened (on a government program! Imagine that!).

Further, I would make a point of checking your math regarding “minority” defaults, especially in lower-middle and lower class neighborhoods. Your take doesn’t square with the facts.[/quote]

First, I don’t think identifying Lee Rockwell as non-GOP friendly really increases his credibility. He’s opposed to most all government, and even moreso government regulations.

Secondly, his claims about the CRE being responsible for the subprime collapse is not borne out by the evidence. Here’s the thing. The CRE only applies to depository lenders. Not non-bank lenders like Countrywide and New Century. In 2006, the biggest year for subprime lending, only 2 or 3 of the largest subprime lenders were depository banks (Wamu and Fremont come to mind, there may have been a 3rd.) Most banks shied away from the subprime market. That market was dominated by non-depository lenders.

While there probably was some loosening of lending standards when the CRE was passed, it was over 20 years later that the securitization of the mortgage market became the rule rather than the exception. The loosening of lending standards was a direct results of lenders not retaining exposure, selling off substantially all of the risk to the mortgage backed securities market.

I think identifying the CRA as the cause of the collapse of that market says a lot more about those making the claim than the market itself. The claim is simply not supported by the evidence.

[SK in CV]

[quote=Allan from Fallbrook]Brian: Uh, yeah, regarding CRA:http://www.lewrockwell.com/dilorenzo/dilorenzo125.html

And before you accuse me of any sort of partisanship, that’s Thomas DiLorenzo writing on LewRockwell.com, a decidely non-GOP friendly website.

While SK might attempt to argue that CRA’s intent was to use proper lending guidelines and standards, the exact opposite happened (on a government program! Imagine that!).

Further, I would make a point of checking your math regarding “minority” defaults, especially in lower-middle and lower class neighborhoods. Your take doesn’t square with the facts.[/quote]

First, I don’t think identifying Lee Rockwell as non-GOP friendly really increases his credibility. He’s opposed to most all government, and even moreso government regulations.

Secondly, his claims about the CRE being responsible for the subprime collapse is not borne out by the evidence. Here’s the thing. The CRE only applies to depository lenders. Not non-bank lenders like Countrywide and New Century. In 2006, the biggest year for subprime lending, only 2 or 3 of the largest subprime lenders were depository banks (Wamu and Fremont come to mind, there may have been a 3rd.) Most banks shied away from the subprime market. That market was dominated by non-depository lenders.

While there probably was some loosening of lending standards when the CRE was passed, it was over 20 years later that the securitization of the mortgage market became the rule rather than the exception. The loosening of lending standards was a direct results of lenders not retaining exposure, selling off substantially all of the risk to the mortgage backed securities market.

I think identifying the CRA as the cause of the collapse of that market says a lot more about those making the claim than the market itself. The claim is simply not supported by the evidence.

[SK in CV]

[quote=Allan from Fallbrook]Brian: Uh, yeah, regarding CRA:http://www.lewrockwell.com/dilorenzo/dilorenzo125.html

And before you accuse me of any sort of partisanship, that’s Thomas DiLorenzo writing on LewRockwell.com, a decidely non-GOP friendly website.

While SK might attempt to argue that CRA’s intent was to use proper lending guidelines and standards, the exact opposite happened (on a government program! Imagine that!).

Further, I would make a point of checking your math regarding “minority” defaults, especially in lower-middle and lower class neighborhoods. Your take doesn’t square with the facts.[/quote]

First, I don’t think identifying Lee Rockwell as non-GOP friendly really increases his credibility. He’s opposed to most all government, and even moreso government regulations.

Secondly, his claims about the CRE being responsible for the subprime collapse is not borne out by the evidence. Here’s the thing. The CRE only applies to depository lenders. Not non-bank lenders like Countrywide and New Century. In 2006, the biggest year for subprime lending, only 2 or 3 of the largest subprime lenders were depository banks (Wamu and Fremont come to mind, there may have been a 3rd.) Most banks shied away from the subprime market. That market was dominated by non-depository lenders.

While there probably was some loosening of lending standards when the CRE was passed, it was over 20 years later that the securitization of the mortgage market became the rule rather than the exception. The loosening of lending standards was a direct results of lenders not retaining exposure, selling off substantially all of the risk to the mortgage backed securities market.

I think identifying the CRA as the cause of the collapse of that market says a lot more about those making the claim than the market itself. The claim is simply not supported by the evidence.

[briansd1]

[quote=SK in CV] The CRE only applies to depository lenders[/quote]

That’s a very good point.

I understand that CRA was to encourage banks to lend to communities in which they operate, that is reinvest in the communities in which they operate. That was to discourage banks from taking deposits from one community and lend only in other communities.

[briansd1]

[quote=SK in CV] The CRE only applies to depository lenders[/quote]

That’s a very good point.

I understand that CRA was to encourage banks to lend to communities in which they operate, that is reinvest in the communities in which they operate. That was to discourage banks from taking deposits from one community and lend only in other communities.

[briansd1]

[quote=SK in CV] The CRE only applies to depository lenders[/quote]

That’s a very good point.

I understand that CRA was to encourage banks to lend to communities in which they operate, that is reinvest in the communities in which they operate. That was to discourage banks from taking deposits from one community and lend only in other communities.

[briansd1]

[quote=SK in CV] The CRE only applies to depository lenders[/quote]

That’s a very good point.

I understand that CRA was to encourage banks to lend to communities in which they operate, that is reinvest in the communities in which they operate. That was to discourage banks from taking deposits from one community and lend only in other communities.

[briansd1]

[quote=SK in CV] The CRE only applies to depository lenders[/quote]

That’s a very good point.

I understand that CRA was to encourage banks to lend to communities in which they operate, that is reinvest in the communities in which they operate. That was to discourage banks from taking deposits from one community and lend only in other communities.

[Allan from Fallbrook]

[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).

[/quote]

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.

[Allan from Fallbrook]

[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).

[/quote]

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.

[Allan from Fallbrook]

[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).

[/quote]

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.

[Allan from Fallbrook]

[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).

[/quote]

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.

[Author]

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