McCain is still running the same ads that made even the fact checker’s heads spin.
But CRA (Community Reinvestment Act) has always had critics, and they now suggest that the law went too far in encouraging banks to lend in struggling communities. Rhetoric aside, the argument turns on a simple question: In the current mortgage meltdown, did lenders approve bad loans to comply with CRA, or to make money?
The evidence strongly suggests the latter. First, consider timing. CRA was enacted in 1977. The sub-prime lending at the heart of the current crisis exploded a full quarter century later. In the mid-1990s, new CRA regulations and a wave of mergers led to a flurry of CRA activity, but, as noted by the New America Foundation’s Ellen Seidman (and by Harvard’s Joint Center), that activity “largely came to an end by 2001.” In late 2004, the Bush administration announced plans to sharply weaken CRA regulations, pulling small and mid-sized banks out from under the law’s toughest standards. Yet sub-prime lending continued, and even intensified — at the very time when activity under CRA had slowed and the law had weakened.
Second, it is hard to blame CRA for the mortgage meltdown when CRA doesn’t even apply to most of the loans that are behind it. As the University of Michigan’s Michael Barr points out, half of sub-prime loans came from those mortgage companies beyond the reach of CRA.
Robert Gordon points out that months ago the right-wing libertarians at Cato and the Republican hacks at The National Review were already trying to do some blame shifting away from under regulated lenders onto libruls, low income home owners and minorities. Fox has been pushing that meme, Fox News’ Neil Cavuto
On September 18, Fox News’ Neil Cavuto conflated giving home mortgages to minorities with risky lending practices, suggesting that there should have been “a clarion call that said, ‘Fannie and Freddie are a disaster. Loaning to minorities and risky folks is a disaster.’ “
All of this finger pointing by Conservative zealots like Cavuto has a fumbling Keystone Cops quality about especially in light of their candidate for president and McCain’s adviser Rick Davis. As we all know Davis was on the payroll of the Homeownership Alliance which was an advocacy group for Fannie Mae and Freddie Mac,
“You can say what you want about free-market distortions, but people like the system because it gets them into houses cheap,” Mr. Davis said to Institutional Investor magazine in 2000, adding that he would run the advocacy group out of his Alexandria, Va., lobbying firm.
Its clear enough for those not wearing Conservative blinders that Republicans were happy to make those loans that Cavuto suddenly decided were poor risks as long as the cash was flowing. Still might be if the regulations had not been weakened by Neil’s buddy Dubya and his Republican hand-maidens in Congress.
Oppenheimer analyst Meredith Whitney, one of the most influential banking analysts on Wall Street, said in a report published Tuesday that the bailout was too late to save the credit and lending markets.
“A virtual suction of liquidity has occurred in the credit and lending markets, and consumer and corporate credit is already showing the effects,” Whitney said.
“What started last summer has accelerated and intensified so much so that we believe any government bailout plan has little hope of improving core fundamentals over the near and medium term,” she added.
That “suction of liquidity” has been more real then virtual for many people. Nice sound bite though.
Another reason not to be so quick on the blame shifting from Wall Str. to Main Str. is these guys knew what they were doing was riding on some pretty thin paper promises. No one held a gun to any mortgage banker’s head and forced them to make poor lending decisions. Greed had a lot to do with it, Report: FBI probes firms at heart of meltdown
Over the past year as the housing market cratered, the FBI has opened a wide-ranging probe of companies across the financial services industry, from mortgage lenders to investment banks that bundle home loans into securities sold to investors. FBI has said its hunt for culprits in the nation’s subprime mortgage crisis focused on accounting fraud, insider trading, and failure to disclose the value of mortgage-related securities and other investments.
The investigations revealed Tuesday come as lawmakers began considering whether to approve emergency legislation that would give the government broad power to buy up devalued assets from troubled financial firms.
Campbell Brown Rips McCain Camp’s “Sexist” Treatment Of Palin. Brown goes way off the deep end on the compliments of Palin. She is flesh and blood, not a goddess. Still, the major point stands. Either McCain thinks Palin can stand up under the same questioning any candidate would get when running for VP of the U.S. or he doesn’t. If Mac daddy thinks his little soul mate isn’t ready for some questions from our generally lame press corps then how ready to lead can she be.