Consequences of Enforced Equality

Are we screwed? And, if so, how did we get here?

Let’s see if an amateur can get the facts straight (mostly) off the top of the head.

The government “encourages” banks and loan organizations to grant mortgage loans to persons whose incomes would normally be judged as too low to afford the house-note. Many (most?) of these persons are not required to make a down payment.

Quasi-governmental mortgage guarantors Freddie Mac and Fannie Mae buy up the loans—the goods ones and the bad ones—bundle them into securities, and sell them back to the banks.

As a result of the housing boom of early this year going bust and an economy gone rocky due to the energy crisis, many of these home-owners found themselves unable to pay their notes and lost their houses. In turn, the banks, who understandably assumed that Freddie/Fannie guaranteed securities were low risk, were left holding the bag.

And now, in case of further mass defaults, the government wants to shore up the banks to the tune of $700 billion.

In short, the government wants to take the taxpayers’ money to get the banks out of a mess which that same government virtually forced the banks into in the first place. And if the answer is no, we all make like Humpty Dumpty. Maybe. But if the answer is yes, the same may happen.

And the Legislative Branch was warned but refused to take action.

Do I have this correct?

UPDATE: The screwers.

Hmmm...who to vote for?

(Thanks to Ace of Spades HQ)

Comments

[Lady Di]

Hello Baldilocks!
Love your site. Hmmm. . .was in the UK this past week and folks were sweating this- very nervous about the financial markets. Does the World think that if our economy goes in the toilet, they'll be AOK?
It is folly to give money to people who cannot afford it and have no intention of paying back the loan. The road to hell is always paved with good intentions.

[DarkStar]

Janet L. Yellen, President and CEO, Federal Reserve Bank of San Francisco

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,[16] and studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households.

[16]. According to the 2006 HMDA data, 19 percent of the conventional first lien mortgage loans originated by depository institutions were higher-priced, compared to 23 percent by bank subsidiaries, 38 percent by other bank affiliates, and more than 40 percent by independent mortgage companies. Robert B. Avery, Kenneth P. Brevoort, and Glenn B. Canner, “The 2006 HMDA Data,” Federal Reserve Bulletin, Volume 94 (2007), p. A89.

Michael Barr, Law Professor, University of Michigan Law School

Despite the fact that CRA appears to have increased bank and thrift lending in low- and moderate-income communities, such institutions are not the only ones operating in these areas. In fact, with new and lower-cost sources of funding available from the secondary market through securitization, and with advances in financial technology, subprime lending exploded in the late 1990s, reaching over $600 billion and 20% of all originations by 2005. 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. Although reasonable people can disagree about how to interpret the evidence, my own judgment is that the worst and most widespread abuses occurred in the institutions with the least federal oversight.

[Donna B.]

"institutions with the least federal oversight"

Let's not overlook AIG and its credit default swaps in this lack of oversight. That is where, IMHO, that regulation completely failed.

Gamblers (not investors) were allowed to bet on whether bundled mortgages were going to fail or not. They increased the dollar cost of failure no matter which side they bet on.

Because of these bets, a $100,000 loan that defaults may now cost "the market" $150,000.

These kinds of bets should never have been allowed, but then nobody in oversight positions really anticipated as far as I can tell.

[The Unseen One]

Essentially yes, you are correct. Also the Clinton administration allowing in 1993-ish the loans to be backed up with basically air.

Independent mortgage companies made a lot of these loans which where then sold to the secondary mortgage market (fannie and freddie). The fact that Fannie and Freddie were buying up these loans gave them the green light to go ahead and make them in the first place.

[Tully]

Banks for the most part maintained their own lending standards. What changed was the secondary market for bundled and securitized loans.

Banks/lenders that had to show a certain amount of loans into "red-lined" areas to comply with CRA would buy bundles of these riskier "red-line" loans rather than do their own assessment work to make individual loans into red-line areas they were actually familiar with. And banks would also buy into the higher-risk "securitized" loan pools to smooth out their local-area risk variability. They were thereby relying on someone else's risk assessments, often at several removes and with little specific risk detail available. A huge portion of those loans came from "independent" loan originators who did little real risk assessment at all, merely originated what loans they could however they could, took their commissions, and then re-sold the loans.

In theory, they were spreading their risk. And they did. They spread it right out into loans that shouldn't have been made in the first place, and into geographical areas that were well into real estate bubbles.

Regional banks that kept their lending primarily inside their own geographical areas and did their own risk assessments (including in red-line areas) are in much stronger position with much less exposure, even if they're in areas where the bubble burst. The hardest hit are the mega-banks and investors that used the securitized/bundled loan pools as market proxies for overall sound lending practices and self-originating in-house risk assessment. And of course their great facilitator, FNMA.

When the signs started appearing that these FNMA "laundered" loan pools of higher-risk mortgages were in trouble because of systemic nation-wide changes in economic conditions and rthe massive housing bubble they pumped, FNMA should have been sounding alarms and moving to tighten issue and trading conditions on those high-risk securitized pools, downgrading their ratings and letting the pooled securities be marked to market. Instead, Franklin Raines and company diddled the FNMA books to hide the softness in those pools to make sure they got their mega-million bonuses, which were performance-based. They were ably assisted by their good and great friends in Congress, with the chief enablers being Dodd, Schumer, and Frank. Attempts by both the administration and GOP members in Congress to stop the gravy train were stonewalled by the Dems under the "leadership" of the Trinity.

This is all pretty transparent history. The 1995 CRA under Clinton enabled the vultures. FNMA funded them and facilitated them in marketing, and Congresscritters, mostly the Dem leadership, enormously compounded the damage by concealing the early signs and blocking GOP attempts at system reforms.

Despite the efforts of some to lay this all off on the indie originators, the fact remains that without FNMA's facilitation and driving of those markets, and the cover provided by FNMA's Congressional covers, this would have been under control MUCH sooner and MUCH cheaper.

[baldilocks]

Between this and the energy issue, it kinda makes one think that the economy is being hobbled on purpose, does it not?

[Anon]

The Feds have been doing this for years if not decades with the sovereign Indian tribes. HUD 'low income' housing is built to any standard they want, is priced to the owner at any price they want and if the owner defaults it is the American public that pays the freight. Tribes built mansions that were too large to insure as a single family dwelling with multiple hot tubs and other expensive amenities and 'sold' them for pennies on the dollar to prominent tribal members while they still had other members living in the bushes or in shanties on beaches. The owners usually defaulted on the loans and were left with the houses anyway and the tribe just passed the cost to us.

The reason nobody noticed/cared for two reasons. First was guilt if there's anything that white America is more guilty about than black folks is Indians. Second it was such small potatoes compared to what usually goes on corruption wise on a res that it was just part of the background noise.

They could have avoided this problem now just by looking at what the consequences were on the res ten-twenty years ago.

[DarkStar]

Banks/lenders that had to show a certain amount of loans into "red-lined" areas to comply with CRA would buy bundles of these riskier "red-line" loans rather than do their own assessment work to make individual loans into red-line areas they were actually familiar with.

Tully, my quotes shows your information is not the cause. The institutions under the CRA were less than half of those who made the loans.

For you to spout the same myth, without disproving the numbers I gave, is telling.

[DarkStar]

Oh, and the subprime mortgages that are in default, are only 2% of the mortgage market.

Total defaults is 9%.

For that to cause failure of this magnitude means there were more fundamental problems than the CRA.

[CGHill]

So the CRA is responsible for a maximum of 49.9 percent. Got it.

[Tully]

DarkStar, your quotes are somewhat irrelevant and giving them the weight you do is telling--it tells me you don't quite understand how the CRA functioned in the marketplace, and that you didn't really bother to read what I wrote.

Banks had to cover their CRA obligations to stay out of the red-line litigation trap, and the bigger and more geographically "spread" the bank was, the more likely they did so by buying the indie-originated packaged high-risk securities in bulk from others rather than making their own CRA loans. Those banks that did their own "red-line" lending generally did so responsibly and locally in their own areas where they knew detailed market conditions, and are only in minor trouble at most. However, they're also NOT lending right now in this market. It's called a "credit crunch."

What DIRECTLY fueled the growth of the indie loan-originators was the CRA. And for the most part the indies went DIRECTLY into high-risk lending that more local banks wouldn't touch.

The big buyers were the mega-banks covering CRA obligations and seeking high-return debt to boost their growth, and the big commercial-lending brokers. To ID same, just check the major recent bankruptcies. But their major facilitator was FNMA, which provided the quasi-insurance GSE function that provided a low (and false) risk factor associated with those high-return loans, and then diddled their own results to cover up the looming problem. And that was the DIRECT result of the corruption of FNMA admin by Congress, mostly some specific Dems. The GOP got some goodies for their friends as well, but the bulk of the action was the other side of the aisle.

Do check out the video--it's pretty on target, even dismissing the snide aspect of it.

I do understand how this happened. I've been involved in supervising CHDO lending in certain ways for over a decade, and am happy to report that where it WAS done responsibly, it's been a real boone to previously red-lined communities. But the indie-originators did not give two hoots about who got left holding the bag--they lent to any warm body that could sign without good screening, took their commissions, sold off the eventual problem to others, then moved on to the next set of suckers.

If you want to ID CRA programs that have actually worked, you'll find that in general they required actual (if reduced) down payments and/or major sweat equity, pre-screened their buyers for credit histories and character, and issued fixed-interest loans. A good CHDO does real good.

Some would like to assign the CRA as a straight corruption shot. It was not, and many banks such as ShoreBank have done right well by their communities under CRA utilizing CHDO's as loan screeners and originators, as was intended. But CRA opened up new ways to abuse the system, and the indies did. The "leadership" at FNMA not only failed to restrain them but actively facilitated them. Feel free to assign that as either incompetence or venality, there seems to have been a good bit of both at FNMA.

See also "Road to Hell: Paving Contractors" and "Perverse Consequences: Law of".

[IronMike]

Baldi,
I have a great ppt that explains this...but it's 3MB. Let me know if you want it and I'll email you. It's pretty funny.
Smooches,
Mike

[me]

I would not take anything the poster Tully says seriously. His classic line is "I can tell by your comments that you don't know xyz". It’s a classic line from a certain sub-category of hustler. Between Tully's claims of many years of experience as a political consultant, his many years working as a pollster and now apparently his involvement "in supervising CHDO lending" he must be old enough to remember the civil war. Just take a look at some of his wide ranging claims of expertise archived on this very blog.

The one thing that is obvious from Baldi's posting: this is the first time she has ever thought about any of this herself. The fact that she fails to mention how members of McCain’s inner circle e.g. McCain’s campaign manager, Rick Davis, was receiving payments from Fannie and Freddie to block regulation of those two companies as recently as last months is not being very honest.
http://www.newsweek.com/id/161218
There are many others republican tentacles in this mess that Baldi is either "selectively ignoring" or she relying soley on this one video, that she now viewed, for her information.

[DarkStar]

Tully, Those banks that did their own "red-line" lending generally did so responsibly and locally in their own areas where they knew detailed market conditions

Generally is a nice word but it didn't match up with little facts like banks not opening branches in some areas to get around CRA requirements or redlining areas where they claim they knew the market conditions but independent analysis disputed the banks' claims.

What DIRECTLY fueled the growth of the indie loan-originators was the CRA. And for the most part the indies went DIRECTLY into high-risk lending that more local banks wouldn't touch.

Indies weren't under CRA rules. If people couldn't get loans under CRA, and indies came up to service that market, how is the CRA to blame?

Again, sub-prime market, serviced mostly by institutions not under CRA. Again, sub-prime market failures is 2% of the mortgage market. Other failures make up 7% for a total of 9%.

Next up is 1A loans for people whose credit ratings are better than sub-prime customers. And as of last year, the default rate of 1A loans were slightly higher than sub-prime.

Oh, and why is it that the speculators aren't a part of this mix? "Flip this House". "Flip That House." "Property Ladder."

Shows on cable television showing property flippers in action.

Uhhh.... Estimates are 20% of mortgage were taken out by speculators.

Whooops.

That doesn't make sense. If the CRA is around and the indies serviced more sub-primes than the banks who were under the CRA, and the in

[Tully]

Amazingly enough, me, when you pick up a few graduate degrees in finance and economics and spend a few decades working in both government and private industry in those, you can indeed gain a wide variety of experience. Apparently you're too young to have much meaningful experience in, well, anything. I'm somewhat older than our host. For a clue as to how old, I heard JFK speak in person, though I admit to being younger then. Do keep beclowning yourself. I find it highly amusing.

Indies weren't under CRA rules.

DarkStar, you keep missing the connection. The indies fed the loans to larger banks that bought them to cover their own CRA obligations while avoiding the overhead of a sub-prime screening process. And they also served to repackage sub-prime loans coming back out from the banks (resale) to get the risk back out of their hands and into the broader market. The profitability for the indies let them (and banks that sold out their iffy loans rather than keeping them) offer stupider and stupider loans for repackaging and securitizing. Were all stupid loans CRA-driven? Of course not, though you seem to think that's required for CRA to have been the catalyzing market factor (it's not). Is the CRA the only factor? Of course not--greed, loopholes in the CRA regs themselves, FNAM's aggressive idiocy, Congressional obstruction of reforms, all played a big part just to list a few factors. But without the CRA and its loosening of the Fed's loan origination rules for banks and indies and FNMA's GSE pseudo-guarantee and role in the mortgage-securitization market, the credit crisis would never have been remotely this large, and the resulting risk would not have been spread as deep and far and wide as it was.

CRA resulted in enormously looser lending criteria across the mortgage market, such as allowing allowing welfare and unemployment benefits to be counted as income, and banning lack of credit history as a negative scoring factor in non-prime loans. FNMA made it worse by being even looser, enabling high-risk borrowers to take out zero-down mortgages with FNMA guarantees and then buying up those loans for repackaging as FNMA-backed securities.

Is this too complicated for you, or are you simply fixated on trying to claim that CRA didn't do this? CRA was a major and requisite cause. It was enabled by indie market greed plumbing the loopholes and by corruption and lousy oversight at FNMA. The CRA rules changes are directly responsible for the loosening of loan criteria that ventually extended throughout the market, and they were primary in FNMA's specific deep problems. The use of imaginative "flexible" loans to stretch one's credit to buy a much bigger home than one could afford, likewise a result of CRA rules changes.

The final element was the idiotic market-risk assumption that real estate would ALWAYS grow in value, that systemic risk was non-existent, therefore it was OK to use current-market equity PLUS as a rational (choke) basis for over-equity loans on property instead of income. 25% equity mortgages! Bojemoi!

More complicated than you like? Sorry, this is reality, not kindergarten. You can blame it on FNMA, fat-cat Wall St. mortgage bankers, Congress, stupid borrowers AND CRA, and you'd still be right. It takes a team effort to screw up this big, but screw-ups don't get this big without every member of the team pulling their weight and then some. Get what I'm saying? Those involved want to deny any role and blame it all on the other players. Sorry, no sale.

Without the 1995 CRA, it probably wouldn't have happened. Without Congressional obstruction of reforms (Dodd, Schumer, Frank) it probably wouldn't have happened. Without the facilitating of indies it probably wouldn't have happened. Without Wall St. commercial-investment-bank greed it wouldn't have happened. And without FNMA top management's active corruption and obstruction and "creative accounting," it probably wouldn't have happened.

None get a pass.

[DarkStar]

The indies fed the loans to larger banks that bought them to cover their own CRA obligations while avoiding the overhead of a sub-prime screening process.

I've worked with 2 indies and 3 full service banks for mortgages and re-fis. I lived and live in integrated areas where CRA is not an issue. ALL of my mortgages have been sold. So regular banks packaged/repackaged and sold their loans to other banks.

CRA resulted in enormously looser lending criteria across the mortgage market, such as allowing allowing welfare and unemployment benefits to be counted as income,

Which hasn't been a factor in the current mess....

FNMA made it worse by being even looser, enabling high-risk borrowers to take out zero-down mortgages with FNMA guarantees and then buying up those loans for repackaging as FNMA-backed securities.

Even though true, one more time, a total of 9% of mortgages are in failure. Of all mortgages, 2% of the failed mortgages are sub-prime.

That's 2%.

No matter how repackaged, a failure of 2% causing this mess is not possible unless there is more to it.

Is this too complicated for you, or are you simply fixated on trying to claim that CRA didn't do this?

Your explanation of it is no where NEAR too complicated. I've read more complete, and more complicated, than you give here.

You lay it at the feet of CRA and then say You can blame it on FNMA, fat-cat Wall St. mortgage bankers, Congress, stupid borrowers AND CRA, and you'd still be right. It takes a team effort to screw up this big, but screw-ups don't get this big without every member of the team pulling their weight and then some.

That is a good point and closer to the truth instead of ideological b.s. of blame the CRA or as Ann Coulter wants to put it, on the darkies. (OK, I use darkies, she used minorities and welfare recipients).

1A1 loans, loans to better credit risks than those given to sub-prime, are on deck. Car loan failures are happening now but aren't getting much noticed even though they are being packaged and sold like mortgages.

There are banks, under CRA rules, that didn't get involved in sub-prime, didn't get sued by the Fed gov't, who are standing healthy today.

None get a pass.

That is fair. But I've been saying for the past 3 or 4 days that accounting, or lack of it, is going to be more at the root of this than people are publicly saying.

[Ben-David]

Ineptitude - or something worse?

Read this:
http://www.discoverthenetworks.org/groupProfile.asp?grpid=6967

And this:
http://www.americanthinker.com/2008/09/barack_obama_and_the_strategy.html

It's comforting in a way to think that Dems and lefties are soft, stuck on stupid.

What if they're actively interested in precipitating crisis?

I am not one for conspiracy theories, but the theory put forward in the links above was hard to shake off - and pretty well documented.

[karen]

I love this quote from "ME" bashing Tully:
The fact that she fails to mention how members of McCain’s inner circle e.g. McCain’s campaign manager, Rick Davis, was receiving payments from Fannie and Freddie to block regulation of those two companies as recently as last months is not being very honest.
Look at who the REAL top recipients of Fannie and Freddie money are --you've got it--DEMS! OBAMA BEING #3!! Hpw do you like THAT for change you can believe in??

[Khaki Elephant]

And for more on the Dems and the Freddie and Fannie debacle, check out this video aptly titled: "Shocking Video Unearthed Democrats in their own words Covering up the Fannie Mae, Freddie Mac Scam that caused our Economic Crisis"

http://www.youtube.com/watch?v=_MGT_cSi7Rs

[David M]

The Thunder Run has linked to this post in the - Web Reconnaissance for 10/01/2008 A short recon of what’s out there that might draw your attention, updated throughout the day...so check back often.

[Donna B.]

Federal intervention in the home mortgage market has always been about low-income, affordable housing. That's why the FHA and Fannie and Freddie and Ginnie were introduced and expanded.

Without the "underwriting" and insurance of those agencies, we'd still be expected to put down 50% and pay off the the loan in 3-5 years.

I'm still having a hard time figuring this whole thing out, but one thing is relatively clear: the substituting of "black" for "poor" only made the situation worse because then there was an extra ace: the race card.

[Steve]

Hello Great Site!

Would you like a Link Exchange with our new blog COMMON CENTS where we blog about the issues of the day??

http://www.commoncts.blogspot.com

[DarkStar]

Subprime counts for 2% of failed mortgages. All failed mortgages are 9% of the mortgage market.

Subprime loans were handled mostly by businesses not covered by the CRA.

The "Blame the Negroes" crowd are throwing the race card around.

[Ben-David]

Darkstar:
Subprime loans were handled mostly by businesses not covered by the CRA.
- - - - - - - -
What businesses?

Anyone issuing mortgages was "covered by the CRA" and was forced to adhere to the quotas set for "affirmative action lending".

Nobody's "blaming the Negroes".

Many are blaming the big-government Democrats who tried to sneak socialism in through America's back door.

[Donna B.]

Darkstar, the CRA didn't say "lend money to black people" it said "lend money to people who don't have sufficient income or credit histories to qualify for a mortgage otherwise."

This was a spur to steadily increasing house prices, encouraging everybody to jump on the bandwagon - both lenders and borrowers.

Most of them were white on both sides. Blaming the CRA (which was fuel on the fire, not the start of it) is not "blaming the Negroes".

The race card was played to help stall any sensible regulation to help us back away slowly from the mess and now we (ALL OF US) are going to pay. Big Time.

Playing the race card is ALWAYS a distraction from whatever issue is at hand, no matter who plays it.

This includes playing the card to prevent honest decent conversation about the problem of racial discrimination.

[DarkStar]

Ben-David, I guess you missed this:

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,[16] and studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households.

[16]. According to the 2006 HMDA data, 19 percent of the conventional first lien mortgage loans originated by depository institutions were higher-priced, compared to 23 percent by bank subsidiaries, 38 percent by other bank affiliates, and more than 40 percent by independent mortgage companies. Robert B. Avery, Kenneth P. Brevoort, and Glenn B. Canner, “The 2006 HMDA Data,” Federal Reserve Bulletin, Volume 94 (2007), p. A89.

Donna B wrote:
Most of them were white on both sides. Blaming the CRA (which was fuel on the fire, not the start of it) is not "blaming the Negroes".

OK, Cavuto, Rush Limbaugh, Michelle Malkin, Ann Coulter, and others, straight up saying the CRA was Affirmative Action or Rush Limbaugh even saying that the CRA was reparations, isn't about Black people....

OK...

My bad.

yeah, that was sarcasm.

[Donna B.]

I am not Rush Limbaugh, Michelle Malkin, Ann Coulter, or "others" and I very seldom read them for they infuriate me with their single-mindedness and hatefulness.

You won't find them linked on my blog. And, yes I know you really aren't accusing me of "being" them.

However, when this "housing for the poor" mess is looked at from the beginning in the early '30s with the establishment of the FHA, Democrat fingerprints are all over every instance of its propagation.

Recently (from the '90s to today) the reason for it was linked to racist mortgages -- either not enough mortgages to blacks or too many. Blacks were stigmatized with the modifier "poor" and were used for political gain.

In some parts of this country there are no blacks. But dang, if those parts don't have poor people too.

Frankly, I think that if there is a difference in the way whites treat "their" poor and the way blacks treat "theirs" is that whites are far more likely to determine that theirs are mentally ill in some way.

But I don't really want to go there because that is a much bigger can of worms than race.

[birdwoman]

the YOUTUBE video seems to be gone. Can anyone give me a gist?

(*)>

[DarkStar]

However, when this "housing for the poor" mess is looked at from the beginning in the early '30s with the establishment of the FHA, Democrat fingerprints are all over every instance of its propagation.

Yes, and?

If you want to argue this is something the government should not be a part of, I agree. But my point about "blaming the negroes" for the current problem, stands.

Again TWO PERCENT of mortgages that have failed are sub-prime mortgages.

The sub-prime market was dominated by companies that don't fall under CRA regulations.

When investment houses are leveraged 40:1 and "get called," for whatever reason, there are going to be problems.

Those people saying it is because of "affirmative action" loans or reparations loans or people on welfare getting loans(!), are race baiting, but "the right" doesn't say shiznet about it because it's coming from "the right."

[Donna B.]

What you are overlooking, DarkStar, is that even though some of the originating lenders didn't fall under CRA rules, the loans they wrote were packaged and bought by lenders who did and they used those loans to meet their CRA requirement.

My point in describing the Democrat finger prints is that "helping" can be another way to keep somebody down. A little bit of help goes a long way, but when you start urging people to take more and more "help" instead of doing stuff on their own, it is intended to create a "loyal" subclass that can always be depended on.

Like I said earlier, I don't read "those" people on the "right" that you are complaining about, so I know very little of what they are saying or their background.

If some of my conclusions sound like theirs, so be it. They didn't convince me, my own experiences observations did.

I don't like being lumped in with a group of people simply because of my skin color any more than anyone else.

[baldilocks]

Did black people propose and pass CRA, Darkstar?

[DarkStar]

What you are overlooking, DarkStar, is that even though some of the originating lenders didn't fall under CRA rules, the loans they wrote were packaged and bought by lenders who did and they used those loans to meet their CRA requirement.

I've checked into that and have found nothing that supports the claim. The sub-prime loans were bundled with "standard" loans and sold off to whomever. That bundling of good and rotten is one of the problems.

Did black people propose and pass CRA, Darkstar?

No. Did Ann Coulter write it was minorities and welfare receivers who caused it? Yes.

Need Neil Cavuto blame Black people? Yes. Did he say the CRA was affirmative action? Yes.

Did Rush Limbaugh say say the CRA was affirmative action loans for Black people? Yes. Did he say the CRA was, essentially, reparations for Blacks? Yes.

[Donna B.]

I think your continuing references to the words of Coulter, Limbaugh, et. al. are strawmen.

They are not here, no one here (that I've read, I admit to having skipped some of the longer comments) is claiming to believe what they believe, and I have explicitly stated that they are not informing my views.

Yet, you continue to rail against them here. Why?

Also, any entity insured by FDIC falls under the CRA. If you want a look at all the different things they can do to meet CRA guidelines, here's the site I'm most familiar with:

http://dallasfed.org/ca/links.html#cra

Click on the Banker's Quick Ref guide pdf and you will find this in the definitions of terms about the Assessment Areas:

"It must include geographies
in which the bank has its main office, branches and deposit-taking ATMs, as well as the surrounding geographies in which the bank has originated or purchased a substantial portion of its loans."

That's exactly what I am talking about -- banks can fulfill at least a part of their CRA requirement by purchasing loans they did not originate.

The only requirements I can find are geography and a particular geographic's median income-level.

I cannot find a requirement that these banks KEEP these loans and service them. Perhaps there is, I don't claim to know that.

The other appalling thing to me is how can an act like CRA, where its stated purpose is to promote home ownership, can include things like favorable funding for owners of rental units. That doesn't compute.

To blame the CRA for adding fuel to an already blazing fire (Fannie Mae and Freddie Mac), is to question what the real purpose of it was. I suggest that it was never intended to raise up the financial status of poor people at all, but to line the pockets of slum lords, whether the slums be white, black, hispanic, or made up of other groups such as the mentally ill or domestic violence victims.

Oh, and to give the politicians something to pat themselves on their backs for while completely misleading the public.

[DarkStar]

I think your continuing references to the words of Coulter, Limbaugh, et. al. are strawmen.

They are the BIG names, it's being echoed. It's not a straw man.

I have explicitly stated that they are not informing my views.

Yet, you continue to rail against them here. Why?

Because I'm making points about general comments, not just yours.

Also, any entity insured by FDIC falls under the CRA. If you want a look at all the different things they can do to meet CRA guidelines, here's the site I'm most familiar with:

Note what I bolded: FDIC. Private mortgages companies don't fall under FDIC.

I suggest that it was never intended to raise up the financial status of poor people at all, but to line the pockets of slum lords, whether the slums be white, black, hispanic, or made up of other groups such as the mentally ill or domestic violence victims.

Except the CRA covered more than slums. It's as if red-lining didn't happen.

[Donna B.]

I wrote: "That's exactly what I am talking about -- banks can fulfill at least a part of their CRA requirement by purchasing loans they did not originate."

Why do you insist that FDIC, CRA covered banks do not do business with companies not insured by the FDIC or covered under CRA?

What is your interest in claiming the CRA had little or no effect? I really don't get it.

I just re-read all the comments here and no one claimed the CRA started the fire, but simply that it was additional fuel.

Yes, you're making points about comments that aren't here and are unresponsive to comments that ARE here.

Why?

"Except the CRA covered more than slums. It's as if red-lining didn't happen."

I don't understand what you're trying to say. Please explain.

[DarkStar]

Why do you insist that FDIC, CRA covered banks do not do business with companies not insured by the FDIC or covered under CRA?

I didn't insist that they don't do business with companies not insured by the FDIC or covered under CRA.

If companies not covered by CRA, bundled and sold loans and companies under the CRA brought them, they did business. However, the commentary being made is saying THE ORIGINATORS of the loans WERE FORCED to do so by CRA and that is not true.

What is your interest in claiming the CRA had little or no effect? I really don't get it.

I never said that, either. I did say, and continue to say, that the CRA is not THE cause of this mess as, again, many commentators are saying.

I don't understand what you're trying to say. Please explain.

Some banks red-lined Black areas, in general, in spite of the economic demographics of the area.

Also, since the CRA covered FDIC institutions, how could slum lords benefit?

[Donna B.]

Me: What is your interest in claiming the CRA had little or no effect? I really don't get it.

DarkStar: I never said that, either. I did say, and continue to say, that the CRA is not THE cause of this mess as, again, many commentators are saying.

I reply: Again, a strawman - you are not responsive to comments left on THIS thread. If you want to argue with Coulter or Malkin, go to their sites.

DarkStar: Some banks red-lined Black areas, in general, in spite of the economic demographics of the area.

I ask: Before, during, or after the CRA?

DarkStar: Also, since the CRA covered FDIC institutions, how could slum lords benefit?

I answer: Because the FDIC institutions could cover part of their CRA by loaning to people building or buying houses to rent or apartment buildings. These can even be SRO units. That's where the slum lords benefit - they get financing with CRA benefits (low downpayment, low interest, etc) from FDIC institutions.

All FDIC means is that an institution offers deposit accounts insured by the government. NCUA insures deposits in credit unions.

FDIC does not insure loans.

[DarkStar]

Again, a strawman - you are not responsive to comments left on THIS thread. If you want to argue with Coulter or Malkin, go to their sites.

That I am not responsive to comments on THIS thread is not true.

I ask: Before, during, or after the CRA?

Mostly before, some after.

Because the FDIC institutions could cover part of their CRA by loaning to people building or buying houses to rent or apartment buildings. These can even be SRO units. That's where the slum lords benefit - they get financing with CRA benefits (low downpayment, low interest, etc) from FDIC institutions.

Understood, but the CRA was designed to benefit families more so than companies, in fact, Black businesses are notoriously under capitalized and complain about the trouble they have getting loans and lines of credit.

FDIC does not insure loans.

I never said the FDIC insures loans, I wrote the CRA applies to institutions under FDIC.

CRA Institutions

CRA Institutions
CRA applies to federally insured depository institutions, national banks, thrifts, and state-chartered commercial and savings banks.

Quick reprise of my points:
Sub-prime didn't cause this mess.

At 2% of mortgage failures, it probably is the first gear in a 5 speed engine.

Bad loans were made but if you want to equate bad loan with CRA "required loans," then that point is invalid becuase most loans were done by entities not covered by (required to do) CRA loans.

Bundling of bad loan with good loans is one of the causes because no one knew the underlying make up of the bundle.

Fannie and Freddie cooked the books.

Lending institutions and brokerage houses made poor decisions with "no doc" loans and the like as well as leveraging themselves 30 or 40 to 1.

There ARE public commentators "blaming negros" for this mess and they are race baiting but those on the right ain't calling them out on it.

I think accounting trickery is at the heart of this mess and we are going to find out sooner or later that is the case.

[Xpressions]

That't the socialist way to take taxpayers money and spread it around. The liberal illuminati do not get it. Why should we work hard everyday to bail out those who were greedy, and those who lived well above their means?