Saturday, April 26, 2014

Last Call For The Zombie CRA Lie

The jokers over at Investors' Business Daily ("When the Wall Street Journal is too liberal a source for your economics news") will keep flogging the ridiculous zombie lie that Bill Clinton created the subprime mortgage collapse through the Community Reinvestment Act.  Now that Hillary Clinton's future plans are making news, they've turned up the heat on this stale, overcooked lie.

Newly released memos from the Clinton presidential library reveal evidence the government had a big hand in the housing crisis. The worst actors were in the White House, not on Wall Street.

During the 1990s, former Clinton aides bragged that more aggressive enforcement of the Community Reinvestment Act pressured banks to issue riskier mortgages, lending more proof the anti-redlining law fueled the crisis.

A 2012 National Bureau of Economic Research study found "that adherence to that act led to riskier lending by banks," with "a clear pattern of increased defaults for loans made by these banks in quarters around the (CRA) exam, (and) the effects are larger for loans made within CRA tracts," or low-income and minority areas.

To satisfy CRA examiners, Clinton mandated "flexible" lending by large banks. As a result, CRA-approved loans defaulted about 15% more often, the NBER found.

Exhibit A in the 7,000-page Clinton Library document dump is a 1999 memo to him from his treasury secretary, Robert Rubin.

"Public disclosure of CRA ratings, together with the changes made by the regulators under your leadership, have significantly contributed to ... financial institutions ... meeting the needs of low- and moderate-income communities and minorities," Rubin gushed. "Since 1993, the number of home mortgage loans to African Americans increased by 58%, to Hispanics by 62% and to low- and moderate-income borrowers by 38%, well above the overall market increase.

"Since 1992, nonprofit community organizations estimate that the private sector has pledged over $1 trillion in loans and investment under CRA."

And since minorities are all broke ass welfare cheats, Wall Street was "forced" to loan good money to those people and that's what destroyed our economy.   There's only one problem with this:  it's a lie that's been pushed by IBD for six years now.  I caught them doing it in November 2008.  They're still doing it now and the same rebuttal applies:

It's pretty idiotic, and any serious person rejects the argument that the CRA forced the banks into making loans they couldn't pay...including the lenders themselves.

But IBD plunges on into the darkness, admitting that even though Countrywide, the largest single subprime lender in America, was not covered under the CRA, it still "came under great pressure to loan to minorities".

No, it came under the pressure of its own greed.

And let's not forget banks like Citigroup that didn't make subprime loans at all, but still collapsed under the weight of their own bad investments they made by choice and had to be rescued with our money.

I said the same thing in December 2012 as well:

And I've killed this lie again, and again, and again, and again, and again, and again, and again.
Once again, the mortgage brokers that made nearly all of the subprime loans that went bad were MORTGAGE BROKERS and NOT BANKS.   Because they WERE NOT BANKS, they were NOT SUBJECT TO THE COMMUNITY REINVESTMENT ACT AT ALL.

And I will keep killing this lie that black people and Bill Clinton caused the goddamn financial meltdown every single time.

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