Last Call

How many times must people drive a stake through the bullshit that is "Broke-ass black people caused the housing collapse" anyway? The Community Reinvestment Act (CRA) did not cause the housing depression. Greed did.

Barry Ritholz kills this garbage once again:

Assume arguendo that CRA legislation forced banks into making high risk, ill advised loans. And, let’s further assume a huge percentage of these government mandated mortgages have gone bad. The buyers who could not legitimately afford these homes or otherwise qualify for other mortgages have defaulted, and these houses are either in default, foreclosure or REOs.

What would this alternative nation look like?

Given the giant US housing boom and bust, this thought experiment would have several obvious and inevitable outcomes from CRA forced lending:

1) Home sales in CRA communities would have led the national home market higher, with sales gains (as a percentage) increasing even more than the national median;

2) Prices of CRA funded properties should have risen even more than the rest of the nation as sales ramped up.

3) After the market peaked and reversed, Distressed Sales in CRA regions should lead the national market downwards. Foreclosures and REOS should be much higher in CRA neighborhoods than the national median.

4) We should have reams of evidence detailing how CRA mandated loans have defaulted in vastly disproportionate numbers versus the national default rates;

5) CRA Banks that were funding these mortgages should be failing in ever greater numbers, far more than the average bank;

6) Portfolios of large national TARP banks should be strewn with toxic CRA defaults; securitizers that purchased these mortgages should have compiled list of defaulted CRA properties;

7) Bank execs likely would have been complaining to the Bush White House from 2002-08 about these CRA mandates; The many finance executives who testified to Congress, would also have spelled out that CRA was a direct cause, with compelling evidence backing their claims.

So much for THAT thought experiment: None of these outcomes have occurred.

Zero.

In reality, the precise opposite of what a CRA-induced collapse should have looked like is what occurred. The 345 mortgage brokers that imploded were non-banks, not covered by the CRA legislation. The vast majority of CRA covered banks are actually healthy.

As the Master Control Program famously said, "End of line." Good old fashioned greed killed the housing market. The CRA is nothing more than a convenient dupe, when it turns out it might have actually been the only positive thing going on in the entire housing market during the Bush years.