All Forums > General Discussion > Non-Sports > Obama: Worst President Ever?
11/7/2013 2:19 PM
Even dogs are capable of learning.  Be nice and you can post in this thread.
11/7/2013 2:22 PM
The actual NBER study is behind a paywall but here is a fairly clear rebuttal of the NBER study.

http://neweconomicperspectives.org/2013/03/the-latest-failed-effort-to-blame-the-community-reinvestment-act-for-accounting-control-fraud.html


The authors assert that the Nation’s largest banks sought to make “markedly riskier” loans while deceiving their regulators and external controls and secondary market customers into believing that the loans were “safe and sound.”  The authors’ study design cannot prove causality.  The mechanism they posit – the more frequent CRA examinations become the more bad loans they make – must mean that bad loans declined during the ’00 decade because the CRA exam frequency and rigor fell sharply after 1999.  
 
11/7/2013 4:18 PM
Do I need to find another article/study to refute that or can we agree that anyone can find something supporting their position on the internet?
11/7/2013 4:38 PM
We can. Can we agree that the NBER study didn't "prove" anything? Also, can we agree that only a small percentage of subprime mortgage originations were related to the CRA, discrediting the theory that the CRA caused the mortgage crisis 30 years after it became law and 12 years after any significant changes were made? 
11/7/2013 4:53 PM
We can agree on some of that but not all.  I'll refer to the study that said it's partly responsible and I'll add that President Clinton, who I voted for twice, was instrumental in loosening credit standards by making significant changes to the CRA in the mid 90s.
11/7/2013 4:56 PM
Can we agree that loans aren't defaulted on immediately?    That it might take some time before the effects of new laws, standards and guidelines can truly be judged?   Because, if we can't, can we call the ACA the worst failure in the history of the uS?
11/7/2013 5:05 PM
Posted by MikeT23 on 11/7/2013 4:53:00 PM (view original):
We can agree on some of that but not all.  I'll refer to the study that said it's partly responsible and I'll add that President Clinton, who I voted for twice, was instrumental in loosening credit standards by making significant changes to the CRA in the mid 90s.
You're still ignoring the part where almost all of the subprime mortgages originated from companies not regulated by the CRA.

Do you understand what that sentence means? (Serious question because, you know, treasury bonds)

 
11/7/2013 6:51 PM
Are we saying that it couldn't be argued that events happened in this order:

1) The CRA spurred banks to make those subprime loans

2) Non-bank lending sources either made them as well or missed out on a large chunk of the market

3) Non-bank lending sources ended up making more subprime loans than banks
11/7/2013 7:30 PM
No, I'm sorry, but that doesn't fit BL's spin of reality.
11/7/2013 7:49 PM
It doesn't fit any reality. If the CRA was responsible, no one not required by law would be giving the loans. They gave the loans voluntarily.
11/7/2013 8:29 PM
11/8/2013 11:03 AM
Posted by tecwrg on 11/7/2013 8:29:00 PM (view original):
That's not what this says:

http://www.sjsu.edu/faculty/watkins/subprime.htm
Too long.

Feel free to point out the paragraph that says that the mortgage originators not regulated by the CRA gave loans involuntarily.
11/8/2013 11:32 AM

My bad.  It doesn't specifically say that.  But it does place the blame squarely in the lap of the Clinton Administration and the CRA.

Read the first four paragraphs, and then the summary at the end, if you don't feel like reading the entire thing.

11/8/2013 12:02 PM
It says that banks that wanted to resell their loans to Fannie had to abide by the rules.

"However, in order for lending institutions to have access to the secondary mortgage market of Fannie Mae they had to abide by Fannie Mae's rules."

 

That's voluntary compliance. 

Then this, in the summary:

"The lenders would not have written the flawed mortgages with their bobby-trapped conditions if they could not have counted on selling them to Fannie Mae or getting default insurance from such sources."


It still isn't the CRA that lead to the crisis. It was the greed of the banks and the ease in which they could pass off the risk (either to Fannie or as CDOs) that created the problem. Fannie gets some of the blame too. And so do the borrowers. And so does the federal government in general, for not being on top of this ****. But, again, it wasn't the CRA, since most subprime loans originated through companies not under CRA regulation.
11/8/2013 12:48 PM
"The deeper roots of the problem go back to the Community Reinvestment Act of 1977."

"Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers."

"By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings."

All these statements seem to run counter to your assertion that the subprime mortgage collapse had nothing to do with the CRA or the Clinton Administration.
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