mrstickball said:
Yes.By repealing specific laws that were in place, separating the ability for a bank to issue the mortgage, package into a MBS or other security, as well as the rating agencies that were in on rating the bonds AAA, it allowed much of the problem to come into being within a 8-10 year period. In addition, the CRA has allowed banks to leaverage predatory lending practices, as you see in the second citation. http://en.wikipedia.org/wiki/Community_Reinvestment_Act#Legislative_changes_1999 In 1999 the Congress enacted and President Clinton signed into law the Gramm-Leach-Bliley Act, also known as the "Financial Services Modernization Act". This law repealed the part of the Glass-Steagall Act that had prohibited a bank from offering a full range of investment, commercial banking, and insurance services since its enactment in 1933. A similar bill was introduced in 1998 by Senator Phil Gramm but it was unable to complete the legislative process into law. Resistance to enacting the 1998 bill, as well as the subsequent 1999 bill, centered around the legislation's language which would expand the types of banking institutions of the time into other areas of service but would not be subject to CRA compliance in order to do so. The Senator also demanded full disclosure of any financial "deals" which community groups had with banks, accusing such groups of "extortion".[60] CRA interjected the Gramm-Leach-Bliley Act into law which allowed the investment banks to package these loans and offer insurance on them. Further reading: http://en.wikipedia.org/wiki/Community_Reinvestment_Act#Predatory_lending In a 2002 study exploring the relationship between the CRA and lending looked at as predatory, Kathleen C. Engel and Patricia A. McCoy noted that banks could receive CRA credit by lending or brokering loans in lower-income areas that would be considered a risk for ordinary lending practices. CRA regulated banks may also inadvertently facilitate these lending practices by financing lenders. They also noted that CRA regulations, as then administered and carried out by Fannie Mae and Freddie MAC, did not penalize banks that engaged in these lending practices. They recommended that the federal agencies use the CRA to sanction behavior that either directly or indirectly increased predatory lending practices by lowering the CRA rating of any bank that facilitated in these lending practices. CRA1999 created the beast that caused many of the maladies you argue about. There have been many Community Reinvestment Acts. I am not attacking the entire act. I am attacking the specific changes made in the 1999 version which was passed by a Republican Congress and signed by a Democrat president.
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I had asked if the CRA happened to put a gun to their heads and DEMAND they get stupid. As I see it, it didn't. What the reforms did was enabled themselves to become increasingly stupid, by removing regulations on the system. What I normally see when people bring up the CRA is say that the government held a gun to their head an demanded they do what they did. Such demands that caused the system to crash weren't there. Wall Street and the banks brought it on themselves. In a nutshell, reforms to reduce regulations caused the meltdown to happen.
