Republicans:Don’t blame the banks-blame the minorities!

The four Republican appointees to the Catfood Commission issued their pre-emptive report and predictably blames the housing bubble and its resulting detritus on big govt (specifically FNMA and FMAC) and even more predictably blames minorities (Page 3, if you need some pain and don’t have the time to bang your head against a wall).

One thing the Republicans always trot out is the Community Reinvestment Act (CRA) of 1977. Briefly, the CRA was legislation which attempted to prevent redlining (geographical exclusion) of minorities and rural Whites from obtaining home loans which they would otherwise qualify for.

Reasoning was, if the community’s money was good enough for the banks to borrow (accept your deposit and pay you low interest) and lend out at higher interest outside of the community, that same credit should be offered within the community as well. Since the govt insured these deposits thru the Federal Deposit Insurance Corporation ( FDIC ) they were within their rights to make this request.

Banks were threatened with heavy fines from the CRA to make them loan $ to unqualified buyers, many of them minorities!

Well, no they weren’t.

One thing to keep in mind is the intent of the CRA was for credit to be extended to qualified borrowers. That was the whole point. It didn’t mandate that anyone lower their standards, only that the same standards apply to all.

The CRA doesn’t have the capability to issue fines, the only stick they have is the threat of a poor CRA compliance report, which could affect the sale or merger of a banking facility.

The CRA only applies to depository institutions. None of the mortgage brokers, the Countrywides, the investment banks and shadow facilities securitizing and slicing/dicing mortgages were covered by it.

The housing bubble was caused by lax oversight and deregulation and easy money. In short, NOT ENOUGH govt.