Did you know...

[John Galt?]

Yes. Sub-prime loans had no effect on real estate prices.

Wow! 

And being in the sun doesn't lead to sunburn... yea, there is a lot of learning going on.

Yes. Sub-prime loans had no effect on real estate prices. The CRA was initiated in 1977. The housing bubble began in 1997. I would think that it would take less than 20 years for a law such as this to have an effect on the economy.

Makes sense. The sun has been around 5 billion years, but no one complained about sunburns until recently. I would think that it would take less than 5 billion years for the sun to have an impact on a persons skin.

[dbucfan]

well there you go - heck - an opportunity to get a plug in for global warm... errrr... man made climate change... this is a great thread - I am learning soooo much

[kevabuc]

Yes. Sub-prime loans had no effect on real estate prices. The CRA was initiated in 1977. The housing bubble began in 1997. I would think that it would take less than 20 years for a law such as this to have an effect on the economy.

.

So what do you attribute the 15-20% annual appreciation rate of real estate during this particular time in history in contrast to the normal 3-4% appriciation rate in just about every year prior to that. This I gotta hear. 

Things increase in value when more people demand them, have easier access to credit to acquire them, the barriers to purchasing them are removed and the commissions and profits to the salesmen are increased to sell more products which in turn creates more demand to manufacturers to create more supply, inflating prices, which are of no concern to the buyer because the nearterm appriciation will more then offset the initial higher purchase price and besides, the loan is just so easy to get. 

This whole thing has a Keynesian feel to it. Substitute easy credit made possible by the US Government policy for actual dollars transferred by way of central planning.   

[CBWx2]

http://www.philadelphiafed.org/publications/annual-report/2008/no-evidence.cfm

[CBWx2]

Yes. Sub-prime loans had no effect on real estate prices. The CRA was initiated in 1977. The housing bubble began in 1997. I would think that it would take less than 20 years for a law such as this to have an effect on the economy.

.

So what do you attribute the 15-20% annual appreciation rate of real estate during this particular time in history in contrast to the normal 3-4% appriciation rate in just about every year prior to that. This I gotta hear. 

Things increase in value when more people demand them, have easier access to credit to acquire them, the barriers to purchasing them are removed and the commissions and profits to the salesmen are increased to sell more products which in turn creates more demand to manufacturers to create more supply, inflating prices, which are of no concern to the buyer because the nearterm appriciation will more then offset the initial higher purchase price and besides, the loan is just so easy to get. 

This whole thing has a Keynesian feel to it. Substitute easy credit made possible by the US Government policy for actual dollars transferred by way of central planning.   

The annual appreciation rate of real estate didn't begin to skyrocket until the early 2000's. This was fueled mostly by speculation. Again, if the CRA had anything to do with a fluctuation of real estate prices, I would think that the appreciation rate would have seen this kind of climb prior to 23 - 25 years after it was enacted. What did change at the turn of the millennium that may have more plausibly played a role in real estate, however, was the repeal of Glass-Steagall, which allowed lending institutions and Wall Street to partner up. There was nothing Keynesian about it.

[CBWx2]

http://www.philadelphiafed.org/publications/annual-report/2008/no-evidence.cfm

In case you are not into clicking on links, let me just post this chart for you:

[Biggs3535]

http://www.philadelphiafed.org/publications/annual-report/2008/no-evidence.cfm

Why is it you and the sources you keep posting continue to ignore the legislation/regulatory changes to the CRA in the 90's?  Nevermind, I know the answer:

http://www.nationalreview.com/articles/225898/planting-seeds-disaster/stanley-kurtz?page=2

Critics of the notion that CRA had a major impact on the subprime crisis ask how a law passed in 1977 could have caused a crisis in 2008? The answer has a lot to do with ACORN — and the critical years of 1990-1995. While the 1977 Community Reinvestment Act did call on banks to increase lending in poor and minority neighborhoods, its exact requirements were vague, and therefore open to a good deal of regulatory interpretation. Banks merger or expansion plans were rarely held up under CRA until the late 1980s, when ACORN perfected its technique of filing CRA complaints in tandem with the sort of intimidation tactics perfected by that original “community organizer” (and Obama idol), Saul Alinsky.

At first, ACORN’s anti-bank actions were relatively few in number. However, under a provision of the 1989 savings and loan bailout pushed by liberal Democratic legislators, like Massachusetts Congressman Joseph P. Kennedy, lenders were required to compile public records of mortgage applicants by race, gender, and income. Although the statistics produced by these studies were presented in highly misleading ways, groups like ACORN were able to use them to embarrass banks into lowering credit standards. At the same time, a wave of banking mergers in the early 1990’s provided an opening for ACORN to use CRA to force lending changes. Any merger could be blocked under CRA, and once ACORN began systematically filing protests over minority lending, a formerly toothless set of regulations began to bite.

ACORN’s efforts to undermine credit standards in the late 1980s taught it a valuable lesson. However much pressure ACORN put on banks to lower credit standards, tough requirements in the “secondary market” run by Fannie Mae and Freddie Mac served as a barrier to change. Fannie Mae and Freddie Mac buy up mortgages en masse, bundle them, and sell them to investors on the world market. Back then, Fannie and Freddie refused to buy loans that failed to meet high credit standards. If, for example, a local bank buckled to ACORN pressure and agreed to offer poor or minority applicants a 5-percent down-payment rate, instead of the normal 10-20 percent, Fannie and Freddie would refuse to buy up those mortgages. That would leave all the risk of these shaky loans with the local bank. So again and again, local banks would tell ACORN that, because of standards imposed by Fannie and Freddie, they could lower their credit standards by only a little.

So the eighties taught ACORN that a high-pressure, Alinskyite outside strategy wouldn’t be enough. Their Washington lobbyists would have to bring inside pressure on the government to undercut credit standards at Fannie Mae and Freddie Mac. Only then would local banks consider making loans available to customers with bad credit histories, low wages, virtually nothing in the bank, and even bankruptcies on record.

[CBWx2]

http://www.philadelphiafed.org/publications/annual-report/2008/no-evidence.cfm

Why is it you and the sources you keep posting continue to ignore the legislation/regulatory changes to the CRA in the 90's?  Nevermind, I know the answer:

http://www.nationalreview.com/articles/225898/planting-seeds-disaster/stanley-kurtz?page=2

Critics of the notion that CRA had a major impact on the subprime crisis ask how a law passed in 1977 could have caused a crisis in 2008? The answer has a lot to do with ACORN — and the critical years of 1990-1995. While the 1977 Community Reinvestment Act did call on banks to increase lending in poor and minority neighborhoods, its exact requirements were vague, and therefore open to a good deal of regulatory interpretation. Banks merger or expansion plans were rarely held up under CRA until the late 1980s, when ACORN perfected its technique of filing CRA complaints in tandem with the sort of intimidation tactics perfected by that original “community organizer” (and Obama idol), Saul Alinsky.

At first, ACORN’s anti-bank actions were relatively few in number. However, under a provision of the 1989 savings and loan bailout pushed by liberal Democratic legislators, like Massachusetts Congressman Joseph P. Kennedy, lenders were required to compile public records of mortgage applicants by race, gender, and income. Although the statistics produced by these studies were presented in highly misleading ways, groups like ACORN were able to use them to embarrass banks into lowering credit standards. At the same time, a wave of banking mergers in the early 1990’s provided an opening for ACORN to use CRA to force lending changes. Any merger could be blocked under CRA, and once ACORN began systematically filing protests over minority lending, a formerly toothless set of regulations began to bite.

ACORN’s efforts to undermine credit standards in the late 1980s taught it a valuable lesson. However much pressure ACORN put on banks to lower credit standards, tough requirements in the “secondary market” run by Fannie Mae and Freddie Mac served as a barrier to change. Fannie Mae and Freddie Mac buy up mortgages en masse, bundle them, and sell them to investors on the world market. Back then, Fannie and Freddie refused to buy loans that failed to meet high credit standards. If, for example, a local bank buckled to ACORN pressure and agreed to offer poor or minority applicants a 5-percent down-payment rate, instead of the normal 10-20 percent, Fannie and Freddie would refuse to buy up those mortgages. That would leave all the risk of these shaky loans with the local bank. So again and again, local banks would tell ACORN that, because of standards imposed by Fannie and Freddie, they could lower their credit standards by only a little.

So the eighties taught ACORN that a high-pressure, Alinskyite outside strategy wouldn’t be enough. Their Washington lobbyists would have to bring inside pressure on the government to undercut credit standards at Fannie Mae and Freddie Mac. Only then would local banks consider making loans available to customers with bad credit histories, low wages, virtually nothing in the bank, and even bankruptcies on record.

The reason changes to the CRA are not discussed in that last link is because the Federal Financial Institutions Examination Council and Home Mortgage Disclosure Act data found that 57% of sub-prime loans were issued by banks not subject to CRA assessment. What does it matter what changes there were to a law that had zero affect on 57% of the mortgages that caused the crisis?

[John Galt?]

http://www.philadelphiafed.org/publications/annual-report/2008/no-evidence.cfm

A jury found "no evidence" to link OJ to the murder of his wife.

it is easy to find "no evidence" when you don't want to find any evidence.

[Biggs3535]

The reason changes to the CRA are not discussed in that last link is because the Federal Financial Institutions Examination Council and Home Mortgage Disclosure Act data found that 57% of sub-prime loans were issued by banks not subject to CRA assessment. What does it matter what changes there were to a law that had zero affect on 57% of the mortgages that caused the crisis?

For the third time, which banks were those?  Because all banks that receive FDIC insurance are under the CRA.

Somebody has manipulated the information that you've bought into hook, line, and sinker.

[CBWx2]

The reason changes to the CRA are not discussed in that last link is because the Federal Financial Institutions Examination Council and Home Mortgage Disclosure Act data found that 57% of sub-prime loans were issued by banks not subject to CRA assessment. What does it matter what changes there were to a law that had zero affect on 57% of the mortgages that caused the crisis?

For the third time, which banks were those?  Because all banks that receive FDIC insurance are under the CRA.

Somebody has manipulated the information that you've bought into hook, line, and sinker.

For starters, if you read the article, the CRA does not cover independent nonbank lending institutions, such as mortgage and finance companies. These companies are under no pressure from anyone to lend to lower income borrowers. Any sub-prime loans offered by sed companies would have been done solely by their own choice. Also, loans by banks that are made to individuals over a certain income bracket are not subject to CRA assessment. In other words, if a bank makes 100 sub-prime loans, 40 of which go to lower income borrowers, 60 of which go to non-lower income borrowers, the CRA does not asses the 60 loans that did not go to lower income borrowers. Those loans have no affect whatsoever on CRA rankings, so it should be clear that these loans were not made in any effort to meet CRA compliance.

Secondly, tell me this Biggs, how does the CRA regulate banks? That is, how do they conduct these assessments? What are the penalties should a bank not meet CRA guidelines? Do they force them to shut down? Do they pull their FDIC insurance?

[Biggs3535]

Secondly, tell me this Biggs, how does the CRA regulate banks? That is, how do they conduct these assessments? What are the penalties should a bank not meet CRA guidelines? Do they force them to shut down? Do they pull their FDIC insurance?

Geezus, for someone arguing against the CRA's role in the housing bubble so adamantly, I would think you would be more familiar with it. Google is a fairly adequate way to find out such information. 

Here's a nice little summary:

The CRA is enforced by four federal government bureaucracies: the Fed, the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation. The law is set up so that any bank merger, branch expansion, or new branch creation can be postponed or prohibited by any of these four bureaucracies if a CRA "protest" is issued by a "community group." This can cost banks great sums of money, and the "community groups" understand this perfectly well. It is their leverage. They use this leverage to get the banks to give them millions of dollars as well as promising to make a certain amount of bad loans in their communities.

Read the whole article.  It gives the effects of added regulations of the '90's to the CRA that all of your sources like to ignore.

[John Galt?]

For starters, if you read the article, the CRA does not cover independent nonbank lending institutions, such as mortgage and finance companies. These companies are under no pressure from anyone to lend to lower income borrowers. Any sub-prime loans offered by sed companies would have been done solely by their own choice.

That is not true, the original CRA was amended in 1992, '94, and '95 to include "any financial institution making commercial loans"

http://www.law.cornell.edu/uscode/html/uscode12/usc_sec_12_00001841----000-.html

Also the Gramm-Leach-Bliley Act (which repealed Glass Steagall) rolled many non-bank financial institutions under the regulation of the FRB, Office of Thrift Supervision, Comptroller of the Currency, or FDIC 

Also, loans by banks that are made to individuals over a certain income bracket are not subject to CRA assessment. In other words, if a bank makes 100 sub-prime loans, 40 of which go to lower income borrowers, 60 of which go to non-lower income borrowers, the CRA does not asses the 60 loans that did not go to lower income borrowers. Those loans have no affect whatsoever on CRA rankings, so it should be clear that these loans were not made in any effort to meet CRA compliance.

Secondly, tell me this Biggs, how does the CRA regulate banks? That is, how do they conduct these assessments? What are the penalties should a bank not meet CRA guidelines? Do they force them to shut down? Do they pull their FDIC insurance?

The CRA is regulated by the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS).

Failure to comply could affect an institution's ability to 1. open new branches, 2. get approval on mergers or acquisitions, 3. get preferential treatment at the Fed Reserves Discount window, 4. affect compliance with net capital requirements of FDIC and FRB.

There is also a boondoggle of paper trails from State agencies that affect the ability to transfer the license of individual Mortgage brokers from firm to firm. This is the big kicker!! If you are a State licensed Mortgage Broker or Loan Originator, and you get "bad marks on your personal record" because of CRA insufficiencies, your license transfers get delayed when you want to switch firms.

In other words, for individual persons making and approving loans, better to Okay a risky loan than get notes added to your license.

[John Galt?]

Yes. Sub-prime loans had no effect on real estate prices. The CRA was initiated in 1977. The housing bubble began in 1997. I would think that it would take less than 20 years for a law such as this to have an effect on the economy.

The original act was passed in '77.

Legislative changes where made in '89, '91, '92, '94, '99, and regulatory changes were made in '95, '99, 2000, and 2005.

[CBWx2]

Secondly, tell me this Biggs, how does the CRA regulate banks? That is, how do they conduct these assessments? What are the penalties should a bank not meet CRA guidelines? Do they force them to shut down? Do they pull their FDIC insurance?

Geezus, for someone arguing against the CRA's role in the housing bubble so adamantly, I would think you would be more familiar with it. Google is a fairly adequate way to find out such information. 

I am familiar with it. I was asking to see if you were, genius. I thought it would be fairly obvious that that was a loaded question.

Here's a nice little summary:

The CRA is enforced by four federal government bureaucracies: the Fed, the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation. The law is set up so that any bank merger, branch expansion, or new branch creation can be postponed or prohibited by any of these four bureaucracies if a CRA "protest" is issued by a "community group." This can cost banks great sums of money, and the "community groups" understand this perfectly well. It is their leverage. They use this leverage to get the banks to give them millions of dollars as well as promising to make a certain amount of bad loans in their communities.

Read the whole article.  It gives the effects of added regulations of the '90's to the CRA that all of your sources like to ignore.

Lew Rockwell? Oh, you mean the non-biased blogger? Funny how data accumulated by the FFEIC is biased, but the ramblings of an anti-government Libertarian blogger are not.