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Originally Posted by mookiemookie
Bull. The loan to securitize model is what pumped the system full of bad loans. Don't even bring up the long-debunked "CRA caused the crisis!" red herring. Banks weren't forced by the big bad government to make loans. And the ones they DID make under CRA were such a tiny percentage of the whole, not to mention less likely to default. No, the profit margin of making loans and turning around and selling them to Wall Street before they ever had to worry about the loan defaulting is what "forced" them to make the loans.
Besides, if it was truly a problem of just bad loans, we could have bought out every subprime loan in existence with the billions upon billions that have been thrown at the problem. But we're still feeling the after-effects despite that money going to Wall Street. That fact alone should tell you its something else.
If you want someone to blame, blame Greenspan's Fed for keeping rates too low for too long. Blame Phil Gramm for exempting derivatives from the Commodities Futures Modernization Act. Blame the overleveraging of firms like AIG, Lehman and Bear Stearns. But save me the CRA garbage.
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Didn't you get the memo? Everything is supposed to be blamed on the Democrats?
But thanks for that post. I also snicker at the thought of the government forcing banks to make loans. I have read the CRA and have not found anything in the wording that "forces" banks to make loans.
There is much to criticize about the CRA, but causing the economic problems we have is not one of them. The CRA may have made it easier for the banks to choose to use poor business practices, but it did not mandate any.
The question would be how many of these "bad" loans were made by institutions not regulated by CRA?