For year, the neocon/teabagger flunkines have been parroting the lie regarding the CRA....and I've continually asked them to produce the section from that law which states in no uncertain terms that banks HAD to make bad loans to minorities, and then bundle those loans with good ones to sell as toxic packages on the financial market.
To date, they can offer nothing more but bluff and bluster, repetition, supposition and conjecture.....just like the BS we see now regarding the Shrub tax cuts and jobs.
It is cute how you framed your question. Of course the CRA didn't just come out and say "Hey all you evil banks now by law have to give out bad loans to coloreds". Please tell me you aren't that stupid? No law is ever written that specific. They are always written in a vague manner then it is left up to the bureaucrats to implement and enforce. Since, I am here to help, I will explain to you as briefly how this all happened and how the entire financial collapse was due to meddling in the free market by politicians and bureaucrats.
First you must go all the way back to the formation of the Federal Reserve and giving them the power to artificially set interest rates.
1) CRA passed by President Carter. From Wikipedia.
The Community Reinvestment Act (CRA, Pub.L. 95-128, title VIII of the Housing and Community Development Act of 1977, 91 Stat. 1147, 12 U.S.C. § 2901 et seq.) is a United States federal law designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods.[1][2][3] Congress passed the Act in 1977 to reduce discriminatory credit practices against low-income neighborhoods, a practice known as redlining.[4][5]
The Act instructs the appropriate federal financial supervisory agencies to encourage regulated financial institutions to help meet the credit needs of the local communities in which they are chartered, consistent with safe and sound operation (Section 802.) To enforce the statute, federal regulatory agencies examine banking institutions for CRA compliance, and take this information into consideration when approving applications for new bank branches or for mergers or acquisitions (Section 804.)[6]
How about that? The federal gobblement is going to "review" lending practices and "take it into consideration when approving new bank branches and mergers or acquisitions". And it was designed to prevent "redlining". Now if you don't know what "redlining", I suggest you ask Jessa Jackson Jr. Just visit him in the rehab center.
2) Now after the CRA was passed, it really didn't have much impact. Not much changed. But, then Billy Clinton and Janet Reno came into office and they put it on steroids. Listen to this press conference by the current Governor of New York. He admits that there will be an increase in defaults. He fucking admits it. Now, I know that whenever a liberal gets caught telling the truth, you fellow travelers will just say he was taken out of context.
3) In 1994, one B. Hussein Obama, working for ACORN sued CitiBank for so called redlining
Case Name
Buycks-Roberson v. Citibank Fed. Sav. Bank Fair Housing/Lending/Insurance
Docket / Court 94 C 4094 ( N.D. Ill. ) FH-IL-0011
State/Territory Illinois
Case Summary
Plaintiffs filed their class action lawsuit on July 6, 1994, alleging that Citibank had engaged in redlining practices in the Chicago metropolitan area in violation of the Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691; the Fair Housing Act, 42 U.S.C. 3601-3619; the Thirteenth Amendment to the U.S. Constitution; and 42 U.S.C. 1981, 1982. Plaintiffs alleged that the Defendant-bank rejected loan applications of minority applicants while approving loan applications filed by white applicants with similar financial characteristics and credit histories. Plaintiffs sought injunctive relief, actual damages, and punitive damages.
U.S. District Court Judge Ruben Castillo certified the Plaintiffs’ suit as a class action on June 30, 1995. Buycks-Roberson v. Citibank Fed. Sav. Bank, 162 F.R.D. 322 (N.D. Ill. 1995). Also on June 30, Judge Castillo granted Plaintiffs’ motion to compel discovery of a sample of Defendant-bank’s loan application files. Buycks-Roberson v. Citibank Fed. Sav. Bank, 162 F.R.D. 338 (N.D. Ill. 1995).
The parties voluntarily dismissed the case on May 12, 1998, pursuant to a settlement agreement.
Plaintiff’s Lawyers Alexis, Hilary I. (Illinois)
FH-IL-0011-7500 | FH-IL-0011-7501 | FH-IL-0011-9000
Childers, Michael Allen (Illinois)
FH-IL-0011-7500 | FH-IL-0011-7501 | FH-IL-0011-9000
Clayton, Fay (Illinois)
FH-IL-0011-7500 | FH-IL-0011-7501 | FH-IL-0011-9000
Cummings, Jeffrey Irvine (Illinois)
FH-IL-0011-7500 | FH-IL-0011-7501 | FH-IL-0011-9000
Love, Sara Norris (Virginia)
FH-IL-0011-9000
Miner, Judson Hirsch (Illinois)
FH-IL-0011-7500 | FH-IL-0011-9000
Obama, Barack H. (Illinois)
FH-IL-0011-7500 | FH-IL-0011-7501 | FH-IL-0011-9000
Wickert, John Henry (Illinois)
FH-IL-0011-9000
4) Now this shakedown of banks were having no real material impact on the financial health of banks. They were able to absorb these bad loans. And don't forget Fannie and Freddie (quasi gobblement agencies) were there to act as sponges for these bad loans.
5) Now fast forward to 2000 and 2001. We have the dot com meltdown and the 9-11 terrorist attacks. The US economy has suffered a serious jolt. And like all pussy politicians, the current crop in Washington can't stomach a recession. Politicians don't get re-elected when there are recessions. So in swoops the Federal Reserve. Remember them? They are going to artificially lower interest rates to get the economy moving. Well, anyone who knows anything about finance will tell you that when interest rates are low, money will move toward more risky investments. People were scared off of the stock market because of the dot com fiasco so they started moving toward real estate. Then it all started.
6) All of these "creative" loans came about by sketchy businesses. Banks jumped on board. Fannie and Freddie were buying them up as fast as the banks could write them. The regulators looked the other way. The politicians looked the other way. It all seemed too good to be true. And it was.
7) Soon Fannie and Freddie were filling up their capacity to take on these bad loans. When they first started chopping up the loans, they were 97% good loans, 3% bad. But over time, the bad loans started to increase. Then they had to chop the loans up even more. They were chopped and diced so many times that nobody even knew who owned the underlying asset or what it was worth (which takes to how it all came down so fast)
8) When the first wave hit, panic struck as individuals began to ask questions about the underlying assets propping up these sketchy loans. All of a sudden people realized that these loans weren't going to get paid back. Banks were now looking at their balance sheets and going "OH SHIT". Why? Well, there was a little known provision in Sarbanes/Oxley. Remember that? That was going to fix everything after Enron. Sarbanes/Oxley said that companies had to account for assets on their balance sheet using mark to market. Which means instead of counting the asset as what you originally paid for it, you had to count what the current value of the asset is TODAY. Well, when the banks looked at all of these CDOs and derivatives they didn't know who owned what or what anyone of them were worth. So overnight they saw their balance sheets eroding trying to comply with mark to market. They could have prevented the huge crash by eliminating mark to market. But, I digress.
I have seriously compressed events in the interest of space and time, but this is a general gist of how the financial collapse unfolded. Like all things, it wasn't just one single event. It was many different events that in isolation seem innocuous enough, but overtime had devastating effects not only on the people they purported to help, but the country as a whole. So did the CRA by itself cause the financial meltdown? No. And I don't know any rational person who thinks that it did. But, to say that it didn't play a part is just being ignorant of the facts. Like all well meaning legislation, there are always unintended economic consequences that aren't felt until long after the legislation is passed. When liberals say stupid things like "Show me where the law said banks have to make bad loans", they are being disingenuous to the extreme and they know it.
The education is free. What you do with it, is solely up to you.
