This one is for dhickey, themage, orion, lifticus, rainjack and all.
I do not see the point of this article.
Yes, people make bad decisions all the time, for all kinds of reasons.
However, if you build a game that actually rewards bad decisions at the cost of the taxpayer that is an entirely different ballgame.
One can point the finger at Wall Street, minorities, overspending middle class or whoever else, but neither created that game and it was foreseeable what would happen.
If Democrats that think Wall Street is full of greedy assholes (which is probably true) decide to put a law into effect that rewards the most stupid kinds of greed, what did they expect?
That the lion would not go for the antelope?
Yes, but the question is whether the CRA “rewards bad decisions.” Bad decisions were made, yes, but is the CRA the culprit? I do not think so. Most of the bad decisions were not incentivized by government.
Most subprime mortgages were not made by CRA regulated banks. CRA regulated banks only issued 25% of the subprime mortgages, and in general, used much lower interest rates when they did.
Many of the failing institutions did not target minority and lower income markets.
Government did not force financial institutions to issue loans with 0% down, to run debt to equity ratios of 30:1, and a myriad of insane lending practices. Actually, practices like this would hurt the banks CRA rating.
Timing. The CRA has been in effect since 1977, and banks were able to comply without the high foreclosure rates. It was not government that forced banks to make these bad loans. It was the profit motive.
And by the way, the CRA did not force banks to do anything at all. Read it for yourself. [/quote]
I read teh Slate article, and to be honest, I find it sort of absurd.
Whether the CRA is to blame or not is hardly the issue. Standards were loosened, and underperforming minorities were lent money:
In the article above, it shows the seamless integration of the bureaucracy and the financial sector.
Clinton apparatchik Cisneros left his government position and immediately joined Countrywide and KB Home, where he proceeded to give away money to his fellow Mexicans based on loose standards.
This report says the same thing and is replete with citations:
Here’s a quantification of the meltdown:
Lastly, if you don’t believe what I’ve just linked, I’d be happy to take you for a ride around Los Angeles and we can take collect our own data. As soon as you’re east of the 405 freeway (read: where it’s mostly black and hispanic), you see several foreclosures on every block.
For the author at Slate to somehow absolve the minorities who signed the loan paperwork is completely absurd. Of course, the meltdown is not entirely their fault any more than it’s entirely anyone else’s fault. There’s plenty of blame to go all the way around.