Matt Yglesias

31 Responses to “CRA Again”

1. Tyro Says:
   September 22nd, 2008 at 6:57 pm

   Your friend Brendan Nyhan is in the midst of publishing a study about how this very post of yours arguing against the right-wingers will cause them to become even more convinced that the CRA is responsible for this whole mess.

2. Seitz Says:
   September 22nd, 2008 at 7:04 pm

   What? Republicans lying again? You’re kidding me.

   More damning are Neil Cavuto’s attempts to blame the problem on “minorities and risky folks”. Umm, I guess he’s saying that minorities aren’t risky. I’m fine with that. But if he thinks that’s the case, why are non-risky minorities part of the problem? Unless he just let slip that he’s a major racist.

   So Neil Cavuto thinks minorities, who aren’t otherwise risky, are part of the problem. Might as well wear a white sheet to work, Neil.

3. Gabriel Says:
   September 22nd, 2008 at 7:15 pm

   No, no – it’s understood that minorities are *inherently* risky. White folks are considered a safe bet unless circumstances prove otherwise.

4. mike Says:
   September 22nd, 2008 at 9:00 pm

   This is typical right-wing approach — look for the government action to blame.

   During the S&L mess, the phony argument was that it was caused somehow by the increase in deposit insurance from $40k to $100k … as if irresponsible risk is OK if your depositors lose everything above $100k but not $40k.

5. roac Says:
   September 22nd, 2008 at 9:04 pm

   If this thesis is correct, a comparison of a map of foreclosures with a map of minority concentration ought to prove it. Anybody seen one?

6. tt Says:
   September 22nd, 2008 at 9:20 pm

   Let’s not forget to mention that John McCain’s campaign manager was paid $1.8 million to support expanded minority lending by Fannie and Freddie. What did he do? No actual work, he just provided access to a certain John McCain.

   http://www.nytimes.com/2008/09/22/us/politics/22mccain.html

7. Don K Says:
   September 22nd, 2008 at 9:43 pm

   I did some work for my former company on opening a bank, and I’ll tell you CRA is a nit in the grand scheme of things. Seems to me everyone involved here was going way beyond any CRA requirements on making higher-risk loans. There are two pieces to a credit loss – the frequency (the percentage of loans that go bad) and the severity (the loss per bad loan). My guess is folks deluded themselves into believing severity always would be zero (or close enough) because of rising real-estate values that frequency didn’t matter.

8. rm Says:
   September 22nd, 2008 at 10:26 pm

   . . . so, I heard on talk radio this morning that forcing the banks to give loans to minorities is the cause of all of this mess, and the callers and hosts all agreed that we must make sure that only the poor, deserving, victimized banks get bailed out, and not any of the fat cats from the Big Homeowner Lobby.

   Propaganda . . . it works.

9. Glaivester Says:
   September 22nd, 2008 at 10:44 pm

   i don’t think that people are blaming the CRA per se. It is the general push to force banks to loan to people with risky credit histories or face charges of discrimination, particularly since the most recent push from 1992-2007.

10. brewmn Says:
    September 22nd, 2008 at 10:57 pm

    “It is the general push to force banks to loan to people with risky credit histories or face charges of discrimination, particularly since the most recent push from 1992-2007.”

    Oh, shut up. It’s obvious that the Republicans are trying to deflect the blame they so richly deserve, and instead pile on a scapegoat both Republicans and white independents feel no guilt about further demonizing, namely poor black people.

11. Ed Marshall Says:
    September 22nd, 2008 at 11:11 pm

    i don’t think that people are blaming the CRA per se. It is the general push to force banks to loan to people with risky credit histories or face charges of discrimination, particularly since the most recent push from 1992-2007.

    Give me a fucking break. No one made the banks do anything.

    Just end this whole line of bullshit right here. Point me towards the trillion dollars of property that sub 750 history credit people got foreclosed on. It’s bullshit. People with *good* credit got steered into ARM’s because a bunch of greedy pigs wanted their extra points of juice.

12. Tyro Says:
    September 23rd, 2008 at 12:41 am

    I don’t think that people were handing out ARMs to house and condo flippers in Las Vegas, Phoenix, and Florida because they were worried about being accused of discrimination if they didn’t. Heck, banks weren’t even working with borrowers directly: it was mortgage brokers.

    This is much like blaming the dot.com bubble on a general interest in getting more capital available to minority-owned businesses. I’m sure some people were interested in funneling more investment money over to minority-owned businesses, but in the end, the reason pets.com ended up with a market capitalization in the billions was because there was too much money chasing too few investment opportunities.

13. Steve Sailer Says:
    September 23rd, 2008 at 2:47 am

    “If this thesis is correct, a comparison of a map of foreclosures with a map of minority concentration ought to prove it. Anybody seen one?”

    Sure, Google and you’ll find lots of maps showing a high correlation between Non-Asian Minorities and risky loans at both the state and neighborhood levels. The hardest hit states — California, Arizona, Florida, etc. — all have high Hispanic percentages. Similarly, black and Hispanic neighborhoods have been hit harder within metropolitan areas, as ethnic activists have been complaining long and loud.

    For example, a percipient April 13, 2007 article in the nonprofit San Diego Voice by Kelly Bennett, “Foreclosure Wave Said to Hit Latinos Hard,” reported:

    “This decade, a national push to increase homeownership among Latinos coincided with one of the longest, most dramatic periods of appreciation for home values. Latino mortgage and real estate professionals put forth aggressive outreach campaigns in the community, while lenders reached out to huge, untapped sections of the market by loosening qualifying standards. …

    “Because a widened lending gate allowed many more Latinos and other minorities into the housing market than had entered previously, lawmakers and special interest groups championed the lenders’ efforts to extend homeownership to those groups.”

    An article in July 20, 2008 San Diego Union-Tribune, “Busted neighborhoods: Foreclosures ravage parts of county where many used risky loans,” by Lori Weisberg and Emmet Pierce confirms Bennett’s findings from 15 months ago:

    “’Any place where there’s a high density of lower-income and less-educated Hispanics and African-Americans you’ll see a larger decline in values because many of these families were put into subprime loans they didn’t understand and shouldn’t have qualified for, more so than in other ZIP codes,’ said Clifford Arellano, a real estate broker whose office is in Barrio Logan.

    Not surprisingly, illegal immigration has played a big role in bubble and bust:

    “A large share of those who took out risky loans were recent immigrants who spoke little English, said Gabe del Rio, vice president of lending and homeownership at Community HousingWorks, a nonprofit developer of affordable housing. Many who have come to his agency for counseling say they didn’t understand the terms of their loans.”

    The homeowners who have been meeting their obligations are suffering collateral damage:

    “Residents forced to vacate their homes leave a void in the neighborhood, said Enrique Gandarilla, executive director of the City Heights Business Association… ‘It’s only getting worse. A lot of loans were made to people who never should have gotten them. The impact on the community is terrible. You have vandalism. You have deterioration in values. You see homes that now are targeted by graffiti.’”

    The article sums up what will be the verdict of history on America in this decade:

    “Typically, a severe housing slump is preceded by a recession and job losses, but that is not the case this time around, [John Karevoll of DataQuick] said. ‘So now all us number crunchers are scratching our heads. This wasn’t caused by a recession, but by stupidity.’”

    But it’s not just the fault of stupid borrowers, although a national policy of importing more of them by not enforcing the immigration laws clearly worsened the problem.

    Stupidity extended all the way up the hierarchy—and that was intentional.

    Political correctness makes people stupid, so diversity provided the ideal cover story for financial crime of the century.

14. rea Says:
    September 23rd, 2008 at 7:00 am

    not just the fault of stupid borrowers, although a national policy of importing more of them by not enforcing the immigration laws clearly worsened the problem.

    Mr. Sailer explains that loans to ilegal aliens worsened the crisis.

    Loans to illegal aliens. Right.

    Racist loon . . .

15. joe from Lowell Says:
    September 23rd, 2008 at 8:22 am

    If this thesis is correct, a comparison of a map of foreclosures with a map of minority concentration ought to prove it.

    No, it wouldn’t. Minorities, and particularly minorities in CRA-served neighborhoods, are on the whole poorer than the population as a whole, so are going to have higher foreclosure rates under any scenario.

    By getting banks to commit to making solid, vanilla loans in those neighborhoods, they kept that rate from being even higher, by squeezing out some amount loans from non-banks from that market.

16. Glaivester Says:
    September 23rd, 2008 at 8:33 am

    By getting banks to commit to making solid, vanilla loans in those neighborhoods, they kept that rate from being even higher, by squeezing out some amount loans from non-banks from that market.

    That’s assuming that without the “vanilla loans” that the people would have taken loans at all and purchased housing.

17. joe from Lowell Says:
    September 23rd, 2008 at 10:24 am

    Yes, Glaivester, it assumes that some amount of the vanilla-loan-accepting population would have otherwise called the scummy mortgage company that put up the fliers. I think that’s a fairly safe assumption. People in middle-class and wealthy suburbs all over the country took out stupid mortgages even as the plain vanilla ones were avaiable. Given that, it seems safe to say that a population with even less financial knowledge would have taken out such loans in the absence of fixed-rate mortgages from banks.

18. softwareNerd Says:
    September 28th, 2008 at 6:39 pm

    Here’s an article from eight years ago, that gives some insight into the players in the CRA scheme.

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