The Community Reinvestment Act

[Jerk]

H5tZc8oH--o

Explains the current situation well.

[Veritas]

I've seen that...it gets a bit foamy mouthed in the last three minutes, but the first few are solid.

[OUHOMER]

Its sad really, that this is not out there. I mean I have seen a few short mentions in some of the Bailout articles. But I don't see the politicians saying yea we screwed that up. They blame it on Wall Street. If i was Wall Street, i would be screaming from the top of my lungs, we were forced into this.

But I think Wall street found a way to make money on this for a short while, so they had their hand in it as well.

Sucks to be bitched slapped from both sides

[Vaevictis]

Except they weren't forced into it.

The CRA explicitly states that its requirements are void when they conflict with the health of the bank.

More than half of these loans were issued by entities not subject to the CRA, and another 30% by entities operating under relaxed regulations.

http://www.fdic.gov/regulations/laws/rules/6500-2515.html


SEC. 804. (a) IN GENERAL.--In connection with its examination of a financial institution, the appropriate Federal financial supervisory agency shall--
(1) assess the institution's record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of such institution; and
(2) take such record into account in its evaluation of an application for a deposit facility by such institution.

http://www.house.gov/apps/list/hearing/financialsvcs_dem/barr021308.pdf


More than half of subprime loans were made by independent mortgage companies not subject to comprehensive federal supervision; another 30 percent of such originations were made by affiliates of banks or thrifts, which are not subject to routine examination or supervision, and the remaining 20 percent were made by banks and thrifts.

http://www.frbsf.org/news/speeches/2008/0331.html


Before I turn to potential interventions, I want to make one final point. There has been a tendency to conflate the current problems in the subprime market with CRA-motivated lending, or with lending to low-income families in general. I believe it is very important to make a distinction between the two. Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans, and studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households. We should not view the current foreclosure trends as justification to abandon the goal of expanding access to credit among low-income households, since access to credit, and the subsequent ability to buy a home, remains one of the most important mechanisms we have to help low-income families build wealth over the long term.

[Vaevictis]

The only place I can see where you can really pin blame on the CRA is when the Clinton Administration lowered capital reserve requirements on Fannie Mae and Freddie Mac from 10% to 2.5%. Essentially by executive fiat, at that.

[Jerk]

The CRA explicitly states that its requirements are void when they conflict with the health of the bank.What about lawsuits that force banks to make bad loans to bad people? Will a judge throw out a lawsuit based on this?

[StoopTroup]

Reliable Investments (http://www.hulu.com/watch/36665/saturday-night-live-reliable-investments#s-p1-st-i2)

[Penguin]

I believe everything I see on YouTube and Wikipedia.

[Vaevictis]

What about lawsuits that force banks to make bad loans to bad people? Will a judge throw out a lawsuit based on this?

I expect that if the bank can show that the requirements would result in an unsafe portfolio of loans, I don't see how he wouldn't.

[StoopTroup]

H5tZc8oH--o

Explains the current situation well.

So Obama...who isn't even qualified enough for Dog Catcher has procured all this money and power in such a short amount of time that he has managed to doorstop the Republicans from saving America from itself?

I bet some poor out of work Conservative put that little mosaic piece of video together down at the public library too.

That Obama guy sure is gonna bungle his idiot *** into becoming POTUS if we don't feel sorry that McCain couldn't get his Party to listen to him.

That damned Obama is gonna ruin us all if he gets in there.

We have got to have McCain win this election...if we don't...none of the GOP will ever kneel to his new position of power that will ultimately save us from Obama's secret plan to use the friends of The Oprah Book Club to empty all of our pockets into the unskilled and down trodden.

We are all doomed. This has been in the works for years. That dumbass Obama has to be some test tube experiment that went wrong up at Harvard.

OMG....:eek:

Jerk....that is some really wild **** right there....lol.

[Jerk]

It was all cited, ST.

Or did he just make up things like "community reinvestment act"?

[Frozen Sooner]

What about lawsuits that force banks to make bad loans to bad people? Will a judge throw out a lawsuit based on this?

A sovereign defense against CRA liability is to show that there is a legitimate business rationale for denial of a particular loan other than a simple assertion that loans in a particular locale go bad more frequently than others.

If someone's credit rating doesn't qualify, then the bank is free to turn the loan down so long as the same standards are used in all locales. If someone doesn't make enough money to support the loan payments, that's a legitimate reason to turn the loan down.

The vast vast majority of the loans that have gone bad (as pointed out above) were either not subject to the CRA by virtue of not being in disadvantaged neighborhoods or were made by lenders not subject to the CRA.

The real problem was that sub-prime lenders started issuing CMOs and that some banks were holding those CMOs as assets. When the sub-primes went south, the CMOs had to be marked to market and the banks became undercapitalized.

[Chuck Bao]

I'm wondering if you guys actually believe what you post.

There is no way that private banks would be forced to make bad loans. No matter how you try to spin this crisis against the Democrats, people with common sense can see through it.

Now, if a bank were to only lend money to certain districts or city suburbs regardless of the credit worthiness of the prospective borrower, then that would be breaking the law, as it should.

Now, if there is a banker who is willing to come on this board and say that they were forced to knowingly extend bad loans because of the CRA, I will retract my comments and offer apologies.

The lower capital adequacy for Fannie Mae and Freddie Mac is far more of a real problem. But, I remember like 10 years ago and Thai banks were forced to adopt BIS capital adequacy ratios. At that time, mortgages were essentially seen as relatively risk free and had zero rating in the risk asset calculation.

Thnkfuy. Tht mode hs been thrown out.

[Frozen Sooner]

I have never been forced to make a bad loan due to the CRA.

Disclaimer: Credit unions are not subject to the CRA, as they are presumed to be adequately serving the community by virtue of being a non-profit co-op.

[StoopTroup]

All I'm saying is...you can't have things both ways...

Either Obama is an inexperienced Leader who won't be able to do squat or he's a crafty guy who has been able to get things done in his favor very quickly.

The GOP has continued to try and get it both ways and it's hurting their cause IMO.