CRA Once Again
As best I can tell no business reporters working for any of the major publications in the United States (or, indeed, around the world — this is a global issue) have reached the conclusion that the 1977 Community Reinvestment Act somehow leapt through a wormhole and caused the subprime meltdown thirty years later. Fortunately for wingnuts, the editors and publishers of every major newspaper have decided that the meaning of “opinion section” is “place where we let conservatives lie all the time,” so we get things like this Jeff Jacoby column in the Boston Globe blaming the insidious nexus of CRA and black people for the problem:
The pressure to make more loans to minorities (read: to borrowers with weak credit histories) became relentless. Congress passed the Community Reinvestment Act, empowering regulators to punish banks that failed to “meet the credit needs” of “low-income, minority, and distressed neighborhoods.” Lenders responded by loosening their underwriting standards and making increasingly shoddy loans.
I’ve linked to Robert Gordon’s debunking of this point several times, but now let me add this other debunking from Ellen Seidman that I hadn’t seen before. And, again, recall that not only is it false to say that CRA caused the bad lending, but completely irrespective of who or what caused the bad lending absolutely nobody forced financial firms to make large, highly leveraged bets on the loans. It was conservatives who blocked regulation of credit default swaps. It was conservatives who watched as the housing bubble developed and it was conservatives who blocked any action to try to ensure a soft landing once the bubble popped. It was conservatives who said we had to make the taxes of the ultra-rich individuals who brought this problem upon us as low as possible. It was conservatives who blocked efforts to curb predatory lending and it was conservatives who blocked efforts to investigate fraud more robustly.
63 Responses to “CRA Once Again”
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September 29th, 2008 at 10:34 am
How do you know that secretly it wasn’t poor black people controlling all them ‘conservatives’ and pulling the strings of all them investment banks & whatnot? You just aren’t willing to see what ain’t before your eyes.
September 29th, 2008 at 10:43 am
Conservatives are, by and large, racists. That’s part of what they are trying to conserve. There are exceptions, but they’re rare enough that the generalization is pretty solid and we shouldn’t be embarrassed to point it out. There’s something gratifying in seeing conservatives’ reptilian side surface in moments of crisis; it’s further evidence that we have been right about them all along.
September 29th, 2008 at 10:44 am
http://bloggingheads.tv/diavlogs/14744
http://www.vdare.com/sailer/080928_rove.htm
September 29th, 2008 at 10:44 am
If the CRA was such a problem (which it appears it was not), then it was conservatives who controlled Congress and the White House and did nothing about a “bad” law. It would appear they are to blame for doing nothing.
September 29th, 2008 at 10:52 am
Thanks for this great snarky put down. This morning I was looking for all of the letters to the editor in the Globe rebutting that racist reptile, Jacoby, but of course there were none. It seems that there are other wormholes that effectively deflect the debunking of conservative talking points.
It took a long time, but the Globe finally got rid of that blithering simpleton, Cathy Young. I just don’t know what it will take to get rid of Jacoby.
September 29th, 2008 at 10:56 am
You say “robustly” too much.
September 29th, 2008 at 10:57 am
Conservatives aren’t really true racists, they’re basically low-information voters who don’t know much better than to accept the misinformation fed them by the lying liars.
September 29th, 2008 at 11:00 am
Yeah but aside from all the facts, what else do you have? Blaming the Dems, minorities and the lower middle class just feels right.
September 29th, 2008 at 11:01 am
I saw a recent post by an honest conservative (sorry, don’t recall who) which just absolutely eviscerated this by looking
at the statistics. Something like 75% of subprime loans were
to whites; only about 16% to blacks, and about 6% to Hispanics.
So it just makes no sense at all to blame minorities for the
failure of subprime loans. The tenuous thread of argument back
to CRA fails at the first hurdle, because “subprime loans” are
overwhelmingly loans to folks as white as a Republican
convention delegate …
September 29th, 2008 at 11:02 am
“Conservatives!” So not one liberal Democrat had anything to do with this crisis? Right…. I’m afraid it’s all there in the congressional record. The Democrats, especially liberal Democrats, were up to their neck in the decision making that led to this crisis.
September 29th, 2008 at 11:02 am
matt: Yeah, but the Republicans never paid much attention to the memo “CRA Determined To Strike In United States.” They’re kind of funny like that.
September 29th, 2008 at 11:07 am
I don’t feel like clicking through the link to see if Jacoby does it, but it’s also become part of the narrative to weave in “community organizers,” specifically ACORN, an organization, incidentally, that Barack Obama worked for.
See! It’s Barack Obama’s fault!
September 29th, 2008 at 11:09 am
I’m thinking that I maybe should’ve used a semicolon after “ACORN.” Or maybe I should’ve split it into two sentences. In any case, I’m not happy with my punctuation choice. FYI.
September 29th, 2008 at 11:12 am
Of course, every economist recognizes that there is normally a 30 year lag between the enactment of legislation and its’ impact on the economy.
September 29th, 2008 at 11:15 am
What does this post have to do with Deep Space Nine?
September 29th, 2008 at 11:15 am
Oooh – NICE strawman by jsb! But nope – no liberal Democrats had anything to do with it. A fair number of DINOs, some DLC Dems (almost the same) just as deep in the pockets of the financial industry as their Republican colleagues, but no liberal Democrats were involved.
They’re next on the list to be sent to pasture so we get more actual liberal and progressive Democrats.
September 29th, 2008 at 11:15 am
The simple fact is that minorities are not over-represented as holders of subprime mortgages relative to their home-owning percentage of the population. The whole meme is bullshit.
September 29th, 2008 at 11:21 am
Hmmmm, wormhole… Reptilian…
I appears that I should not have laughed at the conspiracy theories regarding the nature of our puppet masters.
September 29th, 2008 at 11:21 am
@ Richard Crownie
Perhaps you were thinking about Proffessor Bainbridge
Honest Con
September 29th, 2008 at 11:27 am
If that is how we’re supposed to READ it, then why not just SAY it that way!!! What a d-bag.
September 29th, 2008 at 11:30 am
As a general rule, one should never let a proponent to make a fiscal or financial argument, without asking “how much?” That is, even if the supposed effect exists, how much could it plausibly account for, as a percentage of the larger problem?
Earmarks are another case in point: even if you eliminated all of them (and McCain doesn’t propose to, only the ‘bad’ ones), you’ve basically dropped one shovelful of dirt in the Grand Canyon that is our national debt.
Point being that any analysis that doesn’t even attempt at least a back-of-the-envelope reckoning of the size of the effect described, should be peremptorily ignored.
September 29th, 2008 at 11:33 am
@ Jim
Obviously, the Democrats and Jimmy Carter were in league with the Dominion when they passed the CRA. In fact, I’m almost certain that Jimmy Carter was replaced by a Changeling sometime in the mid 1970’s. Or maybe the argument is that the Bajoran Prophets (aka the wormhole aliens) used their ability to see the future to transmit that knowledge directly to the GOP. (even though that plan didn’t work very well for Wallace Shawn that one time)
http://memory-alpha.org/en/wiki/Prophet_Motive_(episode)
September 29th, 2008 at 11:33 am
This is precisely wrong. The lying liars have credibility in their racist lies because they are feeding off these people’s (admittedly mostly ignorant) racism. The basic problem here is that the term “racist” has been elevated in some circles so that it is only appropriate to use it if people are burning crosses. But racism is merely an attitude of mind (and one, I suspect, from which few Americans are completely free), and one can hold racist attitudes without being a terrible, evil person. Nonetheless, the reason conservatives by this bullshit is because they already have negative attitudes towards African Americans, so scapegoating them is inherently plausible to a sadly large number of people.
September 29th, 2008 at 11:35 am
While the CRA story is essentially debunked, I don’t think we’re out of the woods on the blame here–see http://gregmankiw.blogspot.com/2008/09/distorting-history.html
Basically, the point is that there were other political efforts than CRA that caused the collapse. It was a bipartisan failure–I don’t have evidence of any Democrat doing anything to prevent a low-credit family from getting a mortgage.
September 29th, 2008 at 11:48 am
If foreclosures are an indication, CRA loans are not the problem (as we know).
http://www.traigerlaw.com/publications/traiger_hinckley_llp_cra_foreclosure_study_1-7-08.pdf
Commissioned mortgage brokers earning larger commissions for originating sub prime, no doc loans… now that was a problem.
September 29th, 2008 at 11:54 am
Basically, the point is that there were other political efforts than CRA that caused the collapse. It was a bipartisan failure–I don’t have evidence of any Democrat doing anything to prevent a low-credit family from getting a mortgage.
That’s not the goddamn problem. The problem is the brokers sold a bunch of crazy crap to people who may or may not have had bad credit. They got extra juice on the points when they sold it. The people above them didn’t care if the loans were stupid or not because they were going to package them up and offload them to someone else anyway. Those masters of the universe didn’t care because they were going to repackage them *again* and in the worse case scenario, they have an insurance company on the hook for it. The insurace companies let it ride, because they didn’t peer down into the garbage and normally it’s a very safe bet and free money for them to insure the garbage.
Credit scores had almost nothing to do with this.
September 29th, 2008 at 11:58 am
@ Doofman
Wait, who plays the role of the Grand Nagus in this whole financial crisis?
September 29th, 2008 at 12:04 pm
Obama is The Sisko. Messiah and all.
September 29th, 2008 at 12:11 pm
Apart from being a genuinely racist and ignorant idea aimed at reinforcing the pre-existing beliefs of racist and ignorant voters, this also seems to me to be designed to get this idea “out there” to the point that Obama will be required to address it. They would like to force him to repeatedly defend CRA and minority lending, because they think it will push him back into the “black candidate, black issues” box. They hope it will take away some of his broad appeal and Presidentiality. And it makes it harder for him to talk about things that are important and make sense.
September 29th, 2008 at 12:26 pm
It was conservatives who didn’t want a Black family moving into their neighborhood, period. The terms of the loan had nothing to do with it.
September 29th, 2008 at 12:36 pm
@Jim: I dunno, Bush? He’s got the creepy laugh down, but it doesn’t really translate directly.
@Gabriel: Bell, is it? Those riots of yours were pretty cool.
I think the most interesting thing about the whole “Messiah” angle to Sisko’s character was that, rather than setting him up as the Messiah of the humans, he becomes a demigod-like figure almost immediately upon arriving in a place that he’s never been to help protect a group of people he barely knows, and is suddenly revered by. It made the whole conflict over being both a Starfleet Officer and the Emissary all the more poignant.
(btw, DS9 is the best Trek series ever, hands down).
September 29th, 2008 at 1:27 pm
@ Doofman:
I agree in re DS9 — my favorite.
September 29th, 2008 at 1:30 pm
Richard Cownie Says: I saw a recent post by an honest conservative (sorry, don’t recall who) which just absolutely eviscerated this by looking at the statistics. Something like 75% of subprime loans were to whites; only about 16% to blacks, and about 6% to Hispanics.
“Honest MattY” linked to that “honest conservative” yesterday and helped him smear two people. As it turns out, the “honest conservative” was using data that was over a decade out of date. The “honest conservative” went on to delete comments pointing that out and then locked the thread.
Needless to say, “honest MattY” has not issued a correction.
While the two linked articles seem to provide some sort of counterargument, they also suffer from the LogicalFallacies that “honest MattY” keeps engaging in, although without his vile smearing.
I find this to be a much more persuasive argument. Would it surprise anyone that MattY has turned out – yet again – to be little more than a useful idiot?
September 29th, 2008 at 1:35 pm
WARNING: Link in previous post is to Sailer.
September 29th, 2008 at 2:05 pm
You know one of the first things W tried to do was check Fannie and Freddie and reign in the irresponsible lending that they were proliferating under President Clinton’s bill, and the democrats filibustered the bill and the vote never got to the floor, leaving us where we are now.
September 29th, 2008 at 2:07 pm
I find this [article from a white supremacist site] to be a much more persuasive argument.
Well, color me surprised.
Although I wouldn’t recommend a steady diet of it (indigestion could result), Sailer is worth the occasional read precisely because his writings offer previews of racist ideas before they filter into “respectable” conservative discourse and become crypto-racist ideas. As he points out himself, the “blame dark people for the subprime crisis” meme is now being repeated by the National Review types, and he couldn’t be more pleased.
September 29th, 2008 at 4:33 pm
ditto
September 29th, 2008 at 4:49 pm
Medium Dave: note that Chris ‘WackAhead’ Kelly gets very pissy and starts talking about libel and subpoenas if you take note of the white supremacists who hang out at his shitty sites and the white supremacists to whom he links.
You’d almost think he has an honesty problem.
September 29th, 2008 at 5:30 pm
The CRA was a sop to keep some Democrats from cracking down on lending standards. ‘You want to crack down on irresponsible lending? Well, there goes minority lending…’ And don’t think it didn’t work at the margin.
Evidence would be nice. But the notion that the CRA was part of partisan bargain — CRA for bank deregulation — is not crazy. Time to check the 1977 legislative history.
September 29th, 2008 at 5:34 pm
Well, a quick review of the CRA legislative history doesn’t support my claim that CRA was enacted in part of a deregulatory bargain. Bank deregulation came later and interacted with CRA mostly after 1994 and the Republican takeover of Congress, when CRA did start taking this role, as something with which to buy off Democratic opposition to bank deregulation and interstate bank mergers.
September 29th, 2008 at 8:01 pm
Personally, I blame Karl Rove. (Well, everybody who was anybody deserves some of the blame, but so far Rove has escaped all blame, yet he probably deserves as much as any individual, other than Bush.)
I explain Karl’s culpability in the mortgage meltdown here:
http://vdare.com/sailer/080928_rove.htm
It’s a sophisticated explanation of the basic problems of the country, so I don’t expect Matt to actually, like, read it, but some of his readers might find it interesting.
September 29th, 2008 at 9:17 pm
I saw a recent post by an honest conservative (sorry, don’t recall who) which just absolutely eviscerated this by looking at the statistics. Something like 75% of subprime loans were to whites; only about 16% to blacks, and about 6% to Hispanics.
Uh – who cares? The relevant question is what the percentage of the foreclosures was for each group.
September 29th, 2008 at 9:25 pm
Glaivester: in addition, that “honest conservative” was using data that was over a decade out of date. The “honest conservative” went on to delete comments pointing that out and then locked the thread.
I just checked, and MattY has still not issued even a clarification. How unexpected.
September 30th, 2008 at 10:19 am
What can one feel but pity, upon seeing such meanness of spirit?
September 30th, 2008 at 1:45 pm
From the comments at another site:
Here’s a list of top 500 foreclosure zipcodes from June 2007. Detroit appears there pretty often. I ran the top 5 zip codes on that list through a site called zipskinny.com. It simply shows census data for each zip code.
The top zip code for foreclosures, 44105, located in Cleveland, is 61.3% black. Number two on the foreclosure list is 30310 in Atlanta. According to zipskinny it’s 92.1% black. The third highest foreclosure rate was in 80219 in Denver. It’s 62.3% Hispanic. Number 4 is 48228 in Detroit. It’s 69.4% black. Number 5 is 48205, again in Detroit. It’s 84% black. I stopped at five.
There are arguements on both sides, but it seems impossible to dismiss that CRA was not involved.
October 1st, 2008 at 5:17 pm
I hate to give you the bad news but the CRA DID in fact open the Pandora’s Box we are looking at today. Subsequent administrations have made the matters worse. Fiscal conservatives of BOTH parties were discouraged from combating the poor philosophies set forth becase the poor/race card was used. I worked with a CRA Compliance Officer in a bank from 1991 to 2001 and witnessed FIRST HAND the pressures exerted by the Fed and community groups to make crap loans. Guess where a lot of these loans ended up after our owner died and we were bought out…that’s right good ole FM. So don’t give me this crap the CRA had nothing to do with this mess. It was the proxmiate cause of it. Combine that with the over-reaction of Sarbanes-Oxley to the Enron debacle and we are where we are today.
No bailout bill will fix the root of the problem. Stop making loans to people of any race, color, or creed that simply CAN’T AFFORD them is the only long term solution. This isn’t a racist issue, this is a lack of sound financial lending principles.
October 1st, 2008 at 10:18 pm
Blaming the CRA is such a crock. Loan Originators such as Countrywide, IndyMac, New Century were not covered unde the purview of the CRA. ANd the investment banks that bought loans were under no mandate to purchase CRA loans. And certainly IGA was under no compulsion to insure such loans. All the decions that led to the current problem were made by players of their own volition.
Funny how conservatives want to hold minorities responsible for the consequence of their actions, but don’t hold investment banks, insurance companies responsible for the consequence of their choices.
It is a double standard that our conservative friends practice – simple, clear and outrageous
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