Bob Klahn -> Jeff Binkley wrote:


 BK>  Well... no. This credit crunch arose from the wealthy getting
 BK>  regulations taken off their wealth redistribution schemes. From
 BK>  the working people to them.


Read the following and explain to me how The Community Reinvestment Act of
'77 under Carter, and the The Community Reinvestment Act of 1995, didn't
have something to do with the current problem.



Politicians and pundits have differing opinions about the cause of the
credit crisis now afflicting the American economy. Everything from
deregulation to "Wall Street greed" has been pointed to for
blame. But the Community Reinvestment Act of 1995 may be the real culprit.

The Community Reinvestment Act of 1995, which was a revision of a similar
law enacted in 1977, was a Clinton era law that purported to increase the
availability of loans to low income business owners and home buyers. What
the Community Reinvestment Act did to further this goal was to punish banks
and other lending institutions that did not sufficiently provide credit to
low income borrowers. The Community Reinvestment Act empowered community
organizers, such as Barack Obama, to pressure lending institutions to loan
money to people without the ability to pay it back.

The problem was that many of these borrowers did not have sufficient income
or assets to qualify for a loan Hence the subprime mortgage was born,
offered to borrowers without the kind of credit history or assets to
qualify for a more traditional loan. Various stratagems were employed to
offset some of the risk of loaning money to bad risk borrowers, including
charging a higher interest rate.

This practice, encouraged by the government through the Community
Reinvestment Act and related regulations, seems to have led to the house of
cards that has led to the necessity for a seven hundred billion dollar
bailout of financial institutions. While the banks and other lending
institutions must share some of the blame for engaging in risky lending
practices, these were done in an atmosphere in which political coercion
trumped sound financial practice.

Unfortunately the credit crunch that was caused, at least in part, by the
Community Reinvestment Act was sparked calls for more not less regulation.
While the bailout is probably necessary to save the United States from
economic collapse, it will not address the real problem that led to the
credit crunch in the first place.

http://www.associatedcontent.com/article/1069248/the_community_reinvestment_act_and.html?cat=62

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