Last Call

My favorite Zombie Lie of the housing collapse is back again, Broke Ass Black People Caused The Recession.  Every six months or so we get another iteration of this idiocy that centers around the Community Reinvestment Act, which because of "racial quotas" forced banks to make subprime loans to unqualified brown people, which collapsed the housing sector and the economy.  No surprise, it's Investor's Business Daily again with this lie.

Democrats and the media insist the Community Reinvestment Act, the anti-redlining law beefed up by President Clinton, had nothing to do with the subprime mortgage crisis and recession.

But a new study by the respected National Bureau of Economic Research finds, "Yes, it did. We find that adherence to that act led to riskier lending by banks."

Added NBER: "There is a clear pattern of increased defaults for loans made by these banks in quarters around the (CRA) exam. Moreover, the effects are larger for loans made within CRA tracts," or predominantly low-income and minority areas."

Except as I've been saying for years now, the CRA's effect on the housing collapse was minimal because the banks that made the vast majority of bad subprime loans never made them under the CRA.  Investor's Business Daily has been pushing this outright falsehood for four years now.

 

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.

This "study" doesn't prove anything, other than Investor's Business Daily is the NewsMax of the financial world.