Standard & Poor's made a tiny $2 trillion mistake when rating the US economy

[Final-Fan]

Kasz216 said:

Final-Fan said:

Kasz216 said:

Final-Fan said:
I did not think the (paragraph 4) deregulation was specifically CRA; I thought it was general lowering of standards at Fannie Mae/Freddie Mac. Wrong? The source I saw certainly does not specify.

I don't have time to look... but I thought the lowering of standards at Fannie/Freddie I'm pretty sure had to do with reforms in the CRA.  It was either reforms in the CRA, or heavy government pressue because the CRA didn't work as well as expected.

This more or less was the impetus behind the rise in liar loans as well.  A lot of people who are poorer wouldn't qualify for housing becuase often because of things like past employment history which is taken in consideration with how "stable" you are in your job.

Indeed, it seems to have been lobbyism from people trying to increase CRA applicability, but you can hardly blame the CRA for that.  More like the people that passed the CRA in the first place went a bridge too far. 

As for liar loans, I simply don't believe you can pin that on anyone but the banks that begged people to lie to them. 

A) The CRA is what caused it to happen though.  Otherwise it would of been illegal to basically do reverse redlining.

B) Even if the government is threatening to sue you and harass you if you don't find ways to loan more to poor people even though there are very specific guidlines that prevent loaning to well... people who are poor?

A)  If the CRA caused this to happen, why did it take 25-30 years to become a problem?  It was the later deregulation which is not the same thing as the CRA and was not limited to the CRA loans. 

B)  So wait, you're saying there was some kind of quota banks had to fill or something or face sanctions?!  I had had the impression that the government only "applied pressure" insofar as removing restrictions, and activists (NOT government) and the banks' own profit motives did the rest. 

Am I misunderstanding "lending standards"?  I thought it meant "you are allowed to give this person a mortgage", not "you are required to give this person a mortgage".

C)  And even if it's the latter, I still don't see how blame for liar loans can go anywhere but to the banks and the liars.  No matter how low the standards were, the whole point was that the liars couldn't even meet those standards.  Right?