Why do republicans keep repeating the lie that “loans to minorities” created the crisis?

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Almost all economic experts have said this is a lie. Even bush’s top 2 banking appointees have said this is a lie.

Bush appointee Federal Reserve Chairman Ben Bernanke said “Experience runs counter to the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties.” In a November 25, 2008, letter, Federal Reserve chairman Ben Bernanke stated: “Our own experience with CRA over more than 30 years and recent analysis of available data, including data on subprime loan performance, runs counter to the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties.”

Most subprime mortgages not issued by institutions under CRA. In a paper published on the website of the Federal Reserve Bank of San Francisco, Michigan law professor Michael Barr stated that as of 2005: “Only 25 percent of subprime loans were made by banks and thrifts, and the Federal Reserve reports that only six percent of subprime loans were CRA-eligible.” Similarly, a 2008 study by a law firm specializing in CRA compliance estimated that in the 15 most populous metropolitan areas, 84.3 percent of subprime loans in 2006 were made by financial institutions not governed by the CRA.

Bush appointee FDIC chairwoman Shelia Blair said in the following speech:

Remarks by FDIC Chairman Sheila Bair to The New America Foundation conference: “Did Low-income Homeownership Go Too Far?”: Washington, DC
December 17, 2008
Good morning and thank you for inviting me to speak.
What I’d like to do today is bury two myths that have been circulating lately. The first myth is that the Community Reinvestment Act caused the financial crisis. And the second myth is that working with troubled homeowners to reduce foreclosures lacks urgency and may be akin to a fool’s errand.

CRA as a scapegoat
I think we can agree that a complex interplay of risky behaviors by lenders, borrowers, and investors led to the current financial storm. To be sure, there’s plenty of blame to go around. However, I want to give you my verdict on CRA: NOT guilty.

Point of fact: Only about one-in-four higher-priced first mortgage loans were made by CRA-covered banks during the hey-day years of subprime mortgage lending (2004-2006). The rest were made by private independent mortgage companies and large bank affiliates not covered by CRA rules.

You’ve heard the line of attack: The government told banks they had to make loans to people who were bad credit risks, and who could not afford to repay, just to prove that they were making loans to low- and moderate-income people.

Let me ask you: where in the CRA does it say: make loans to people who can’t afford to repay? No-where! And the fact is, the lending practices that are causing problems today were driven by a desire for market share and revenue growth … pure and simple.

CRA isn’t perfect. But it has stayed around more than 30 years because it works. It encourages FDIC-insured banks to lend in low and moderate income (or LMI) areas, and I quote, -“consistent with the safe and sound operation of such institutions”.

Another question: Is lending to borrowers under terms they can not afford to repay “consistent with the safe and sound operations”? No, of course not.

CRA always recognized there are limitations on the potential volume of lending in lower-income areas due to safety and soundness considerations. And, that a bank’s capacity and opportunity for safe and sound lending in the LMI community may be limited.

That is why the CRA never set out lending “target” or “goal” amounts. That is why CRA supporters, many of you here today, have labored for three decades to figure out how to do it safely. It makes no sense to give a loan to someone under terms you know they can’t pay back. That’s a set up for failure.

Despite our current problems, the homeowner is still one of the best credit risks in the world. Today, the delinquency rate on all home mortgages is only 3.6 percent. For subprime loans, there is a stark difference in the type of loan. The rate of seriously delinquent subprime fixed rate loans is a little more than one-third the rate for subprime adjustable rate mortgages.

Any family willing to work, save money, pay the mortgage on their house is a sound basis of credit and a sound basis for America.

So let the record show: CRA is not guilty of causing the financial crisis.

Oficina bancaria

14 Comments
  1. Reply
    subwm4bush
    February 6, 2011 at 11:52 am

    We like to scapegoat minorities. The truth is that the vast majority of the toxic loans were made by private institutions not covered under the CRA. More than 85% of toxic loans were made by private institutions not covered under the CRA. Far more money was lost with toxic sub-prime loans for mcmansions than CRA loans. Many in our GOP base fall into this category and we do not want to offend them by blaming them for their own stupidity, so we try to shift blame to minorities. It is easier for us to tell our base that their home was foreclosed because of blacks than to tell them they were stupid for taking out an ARM on a house they could not afford.

    Note that our GOP posters will never read all of your post because it is too long, they cannot read that much. There are too many details. You have to keep it very simple for them by using a short talking point.

  2. Reply
    Wyman
    February 6, 2011 at 12:24 pm

    because it works

  3. Reply
    TruthSeeker818
    February 6, 2011 at 1:21 pm

    WOW definitely didnt read your novel there….Y!A isnt a publishing company, sorry.

    This is the first time i ever heard that excuse, do you have any real sources that prove republicans are claiming this?

  4. Reply
    GoGo Girls
    February 6, 2011 at 2:15 pm

    Loans to all who had low credit scores caused this mess. Barney Frank in collusion with Fannie Mae and Freddie Mac created this mess.

  5. Reply
    GOD'S Reporter
    February 6, 2011 at 2:30 pm

    yeah I’m betting not a single person reads all that.

  6. Reply
    warren v
    February 6, 2011 at 2:45 pm

    I did not read your book, but I have never heard anyone reference loans to minorities as the issue, I have heard people say loans to unqualified people or loans to people that did not have the means to pay them back was a contributing factor to the down fall of the economy.

    Why do you interject race into something that is not about race?

  7. Reply
    Rev-'em-up-Ray-Gun
    February 6, 2011 at 3:00 pm

    The CRA was part of it surely, but as usual the real culprits are the banks, home builders, mortgage companies that allowed people to get houses at inflated prices that they could not afford.

    House flippers, Real Estate agents, builders, as usual, now cry foul and yet it was their practices that drove real estate prices sky high until the market collapsed.

  8. Reply
    Spaceman Spiff
    February 6, 2011 at 3:15 pm

    Not loans to minorities. It was loans to people the bankers knew couldn’t pay them back. It’s an offshoot of political correctness that has infected this country. Many low income workers were given loans to buy $ 300,000 homes. When the payments had to be made, the workers couldn’t pay them, and this created a problem for the banks. This is what led to the financial crisis we have now.

  9. Reply
    Nrp77
    February 6, 2011 at 3:51 pm

    Actually it happened b/c people who didn’t have enough money to afford these homes and those with bad credit were allowed to get mortgages they could not afford. Many were uneducated on the difference b/w ARM loans and fixed rate loans. When the ARM adjusted, they couldn’t afford to pay. I don’t see where Republicans are blaming minorities. If anything, many of us, minorities, can afford the homes we purchase.

  10. Reply
    beach heaven
    February 6, 2011 at 4:07 pm

    I’m not a Republican, but the CRA, combined with Fannie and Freddie were major causes. When people defaulted on their loans, banks and investment houses lost. This is an over simplification, but has a lot of accuracy. Furthermore, a lot more houses are about to go into foreclosure. Did you know that housing prices have not been this low in over 40 years, and this has been 40 years in the making. Your rant has no sources to back it up.

  11. Reply
    Stainless Steel Rat
    February 6, 2011 at 5:04 pm

    History will tell the true story and you may have to wait twenty years to find out the truth.

  12. Reply
    raymond
    February 6, 2011 at 5:52 pm

    Your talking points are not relevent. Your best description of what took place
    was by the poster that very clearly and concisely pointed out who got loans
    and why they shouldn’t have. ARM is what killed the housing market, Nice
    try for the discrimination bull shit again.

  13. Reply
    X-Ray
    February 6, 2011 at 6:15 pm

    BUSH LOWERED UNEMPLOYMENT TO 4.2% (Feb 2001-2009)
    (Source: US Dept of Reality – Actual Labor Statistics)

    OBAMA RAISED OUR DEBT FASTER THAN ANYONE EVER HAS
    (Source: US Reality Dept – Bureau of Public Knowledge)

    OBAMA TURNED A TURNED A CONTRIBUTION FROM GOLMAN SACHS INTO A MULTI TRILLION DOLLAR DEFICIT
    (Source http://www.opensecrets.org/pres08/contrib.php?cycle=2008&cid=N00009638)

    (Please note: Obama also got big contributions from Citibank, Chase and JP Morgan)

    OBAMA OVERSAW A DOW JONES THAT PLUNGED LOWER THAN IT EVER DID WHEN BUSH WAS PRESIDENT
    (Wall Street)

    UNEMPLOYED PEOPLE CAN’T AFFORD GASOLINE (Source: US Dept of Job Losses – Relevant Information Administration)

    OBAMA IS DOING A GREAT JOB CAUSING A DEPRESSION

    “But Mr. President, there aren’t any jobs!”

  14. Reply
    Sasha Puchinsky
    February 6, 2011 at 6:59 pm

    I really don’t hear them say that. Could you stae where you got your facts

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