That's a completely inaccurate statement of what the CRA did, and didn't do. It prohibited banks from discriminating in loan making by preventing them from making a loan to individual A with credit score 700 who lived in "nice' neighborhood X, and denying a loan to individual B with an indentical credit score who lived in "bad" neighborhood Y.
I repeat - NO ONE held a gun to the banks' heads. A lot of right wing mythology around the CRA that isn't correct.
Your quotes from earlier: "For a 4-6 week period in 2008, you could not borrow money."
"... loans stopped being made."
Not true. Lending didn't stop as you assert, it certainly tightened in some markets. Your numbers support that. More problematic is the situation today. The "post TARP" lending requirements (loan classification requirements) and latest round of stress tests are forcing banks to divest of perfectly sound client relationships because those clients don't fit stress test and acceptable federal loan classification profiles. Go ask your banker about how the asset risk guidelines the stress tests used. (Hint: they are all over the place)
Your quote: "But nothing forced the banks to make these loans. They did so because they could and because they thought they would make money on it. And they did, for a while.
... NO ONE held a gun to the banks' heads. A lot of right wing mythology around the CRA that isn't correct."
Certainly many banks got carried away in the mid-decade real estate boom and got in over their heads. They deserve to fail. However, that would have been impossible if Fannie and Freddie had not underwritten the loans. As for CRA, you are vastly understating how aggressively it has been implemented. It isn’t just about fair credit (there are actually other laws about that). Under CRA, banks are required to put facilities in low income areas, fund loans in those areas or be held as "redlining" and incurring fines and other severe restrictions. CRA evaluates banks under an investment test and a service test that consider, respectively, the number and types of investments and services (branches and bank accounts) in low- and moderate-income communities. When conducting the evaluations, examiners are to consider the “performance context” of the lending institutions. This subjectivity has produced interesting results.
The noble original intent of the program to assure equitable lending to those in similar situations has been subverted to a sort of financial affirmative action program to place loans that were known future losses in low income areas. As an offset, Fannie and Freddie enabled the process as they bought the paper that was underwritten by the banks. They still own it. (Question: Why are Freddie and Fannie exempt from Dodd-Frank??)
CRA also enables a sort of extortion. "Community Groups" such as ACORN and the Rainbow Coalition can contest a CRA rating in order to get "concessions" from the institution. This is often done if a bank wants to acquire another institution and the CRA status is contested until the community group is "satisfied".
To quote senior member of the House Financial Services Committee, Rep. Maxine Waters (D-CA) in 2004, “We do not have a crisis at Freddie Mac, and particularly Fannie Mae, under the outstanding leadership of Frank Raines.” Rep. Waters has also indicated that Fannie and Freddie do not need further regulation.
Shocking Video Unearthed Democrats in their own words Covering up the Fannie Mae, Freddie Mac Scam that caused our Economic Crisis - YouTube
It was on Mr. Raines' watch that Fannie Mae went bankrupt. Oh yea, that is the same “Frank” Raines that was the Head of the Clinton Budget office and vastly overstated Fannie Mae’s earnings in order to receive $90 million in bonuses. Where is he today you may ask? In prison? Nope. He's living well thank you on his rumored $240M golden parachute (Less the $50M) the government made him give back.
How about Mr. Raines predecessor at Fannie? That's James A. Johnson, tapped by the Obama campaign to help select a vice presidential running mate. He resigned however when it was discovered he received a $2M below market loan from Fannie partner Countrywide Financial. The fact that audits of Fannie after Mr. Johnson's departure showed that in 1998 (like Mr. Raines later), he manipulated earnings reports to receive a $1.9M bonus he was not entitled to didn't bother the Obama campaign in his selection. He’s rumored to have a $28M golden parachute.
But then Jamie Gorelick, rumored to be an attorney general candidate in an Obama administration, was vice chairman of Fannie Mae from 1997 to 2003. Penny Pritzker, Mr. Obama's national finance chairman, has been described as "the Michael Milken of the subprime mortgage crisis" for her pioneering of the packaging of bad loans with good ones at her now defunct Superior bank in suburban Chicago.
The Gambino family couldn't run as vast a criminal enterprise as Fannie or Freddie and you’re saying it’s not at the heart of the problem???
Root cause here is BIG Government and its self-serving interventions into the daily lives of Americans.