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Try to keep an open mind while reading
this. I know that every foreclosure is not a CRA loan and that everybody who spent beyond their financial limits must take
some blame as well. We are not children anymore! The CRA is just what got the ball rolling. Once the Government created a
system that would gladly buy up risky loans why would someone think that companies would not go outside the program guidelines?
If there is a place to dump these loans and you are making a ton of cash why not? The Government needs to stay out and let
businesses be responsible for their profits and losses without intervening. The Fed also should not be setting interest rates! This should be done by the markets to eliminate the sub-prime problems. If you don't understand sub-prime lenders and borrowers click this link.
Back in 1973 some people got a brilliant idea. This idea was by a group of community organizers
in Chicago, Illinois, to force banks to give loans to low income individuals using race and minority status as a leveraging
tool. In 1977 the efforts by these community organizers was noticed by our Democrat led congress who pushed through The Community
Reinvestment Act and the Democrat President Jimmy Carter signed the bill into law. The Community Reinvestment Act required
Fannie Mae and other banks to issue a percentage of mortgages to low-income people and families which under normal bank guidelines
they did not qualify and could not afford. This Act also instructed the Federal Reserve to insure banks and savings and loans
"only" after they met the requirements set forth in the Community Reinvestment Act making them lower their standards
for loans and increasing their risk on mortgages. In perspective if a bank or savings and loan wanted to survive with FDIC
insurance then it had to take riskier mortgages to qualify for it. This was a contributer to the S&L crisis in the 80's
and 90's but it didn't stop there. The sub-prime lending continued.
During the late 1980's and 90's is when President Obama started working
with some of these community action groups, mainly Acorn. President Obama says that being a community organizer in Chicago
and working on housing advocacy is one of his proudest accomplishments. "You've got only a couple thousand bucks
in the bank. Your job pays you dog-food wages. your credit history has been bent, stapled, and mutilated. You declared bankruptcy
in 1989. Don't despair: You can still buy a house." is how an article in the Chicago Sun-Times started back in April
of 1995. It then directed the prospective buyers who fit this description to contact an agency named Acorn for assistance.
A study by Rutgers University political scientist Heidi Swarts describes Acorn as "oppositional outlaws" and think
of themselves as "militants unafraid to confront the powers that be". Acorn worked hard for the communities
to force banks to give mortgages by picketing, threats, breaking in, showing up at bankers homes and intimidating their families.
Plus by legal means based on racism and prejudice.
Then in 1992 Federal Housing Enterprises Financial
Safety and Soundness Act was implemented by President George W. Bush. This gave
a more in-depth oversight of the banks including the GSE's, Government Sponsored Enterprises, Fannie Mae and Freddie Mac.
But it also required Fannie Mae and Freddie Mac, who purchase and securatize mortgages, to devote a percentage of their
lending to support affordable housing. So yes even the Republicans share some blame on this one.
1994 comes around and President Bill Clinton signs The Riegle-Neal Interstate Banking
and Branching Efficiency Act, which repealed restrictions on interstate banking, and through community pressure loosened up
restriction on the Community Reinvestment Act. Advocacy groups increasingly used the public comment process to
protest bank applications on CRA grounds. When applications were highly contested, federal agencies held public hearings to
allow public comment on the bank's lending record. During March 1995 congressional hearings William A. Niskanen, following
service on President Reagan's Council of Economic Advisers, chair of the Cato Institute, criticized the proposals for
political favoritism in allocating credit and micromanagement by regulators, and that there was no assurance that banks would
not be expected to operate at a loss. He predicted they would be very costly to the economy and banking system, and that the
primary long term effect would be to contract the banking system. He recommended Congress repeal the Act.
According to a 2000 United States Department of the Treasury study of lending trends in 305 U.S. cities between 1993 and 1998,
$467 billion in mortgage credit flowed from CRA-covered lenders to low- and medium-income borrowers and areas. In that period,
the total number of loans to poorer Americans by CRA-eligible institutions rose by 39% while loans to wealthier individuals
by CRA-covered institutions rose by 17%. The share of total US lending to low and medium income borrowers rose from 25% in
1993 to 28% in 1998 as a consequence. In October 1997, First Union Capital Markets and Bear, Stearns & Co launched the
first publicly available securitization of Community Reinvestment Act loans, issuing $384.6 million of such securities. The
securities were guaranteed by Freddie Mac and had an implied "AAA" rating. In 1997 Fannie was proud to announce
its goal was to grab up at least $20 Billion worth of these sub-prime loans. What? Thats something to be excited about. Speaking in
February 2008 to the Congressional Committee on Financial Services hearing on the CRA, Sandra L. Thompson, Director of
the Division of Supervision and Consumer Protection at the FDIC, applauded the positive impact of CRA, noting that, "studies
have pointed to increases in lending to low- and moderate-income customers and minorities in the decades since the CRA's
passage." She cited a study by the Joint Center for Housing Studies at Harvard University, that found that "data
for 1993 through 2000 show home purchase lending to low- and moderate-income people living in low- and moderate-income neighborhoods
grew by 94 percent – more than in any of the other income category. How Exciting!!
Well to put it simply with these so called NINJA loans, No Income/ No Job/ No Assets, anyone with a heartbeat could buy a
house! So housing boomed, mortgage brokers made a fortune, banks made a fortune selling these sub-prime loans to Freddie and
Fannie and builders made a fortune flooding the United States with homes. But all of a sudden there are no more people to
buy these homes! So now what? Well construction workers get laid off, businesses can't sell as much and lay off and it
creates a domino affect until people start defaulting on these sub-prime loans. Now with the entire residential construction
industry nearly at a stand still every business is feeling the repercussions as millions can't pay their mortgages. Thanks
to this trillion dollar shakedown of the banks by our government in the name of equal housing opportunities we now all have
to pay. Being born in the USA does not entitle you to a home nor does it give the government the right to use our tax dollars
to ensure that loan!
By: Thomas McEntire
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