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The poor folks did it!
Naw, the government did it!
Ron Johnson’s latest ridiculous statement is about the housing bubble and economic meltdown.
He’s blaming the Community Reinvestment Act of 1997 for the recession.
Why? Because the federal government was practically forcing banks to lend to poor (read: not white) folks who shouldn’t own homes in the first place!
This right-wing meme is so stupid that even BusinessWeek debunked it:
Naw, the government did it!
Ron Johnson’s latest ridiculous statement is about the housing bubble and economic meltdown.
He’s blaming the Community Reinvestment Act of 1997 for the recession.
Why? Because the federal government was practically forcing banks to lend to poor (read: not white) folks who shouldn’t own homes in the first place!
This right-wing meme is so stupid that even BusinessWeek debunked it:
The Community Reinvestment Act, passed in 1977, requires banks to lend in the low-income neighborhoods where they take deposits. Just the idea that a lending crisis created from 2004 to 2007 was caused by a 1977 law is silly. But it’s even more ridiculous when you consider that most subprime loans were made by firms that aren’t subject to the CRA. University of Michigan law professor Michael Barr testified back in February before the House Committee on Financial Services that 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations.
And:
Not surprisingly given the higher degree of supervision, loans made under the CRA program were made in a more responsible way than other subprime loans. CRA loans carried lower rates than other subprime loans and were less likely to end up securitized into the mortgage-backed securities that have caused so many losses, according to a recent study by the law firm Traiger & Hinckley (PDF file here).
Finally, keep in mind that the Bush administration has been weakening CRA enforcement and the law’s reach since the day it took office. The CRA was at its strongest in the 1990s, under the Clinton administration, a period when subprime loans performed quite well. It was only after the Bush administration cut back on CRA enforcement that problems arose, a timing issue which should stop those blaming the law dead in their tracks. The Federal Reserve, too, did nothing but encourage the wild west of lending in recent years. It wasn’t until the middle of 2007 that the Fed decided it was time to crack down on abusive pratices in the subprime lending market. Oops.
And Johnson thinks he should be crafting credible policy?
Let’s hope he doesn’t get anywhere near DC.
