One of our faithful readers has continually commented on the housing crisis and he blames the banks, however, we have argued that it was the responsibility of the Community Reinvestment Act (CRA). This legislation was passed in 1977 under the Carter Administration in an effort to prevent "red-lining" a practice where a bank would put a red line around an area into which it would not sell mortgages.
As with all well intended legislation this one's original intent was modified when the regulators of the banks used CRA as an "incentive" to obtain certain bank behavior.
In the following post, John Carney, tells the story of how the Act ended up causing the 2008 Housing "Bubble." By the way, he did not believe the CRA was the cause until he did his research. It is interesting reading as it confirms what we have been saying for years.
Conservative Tom
Here is the link:
http://articles.businessinsider.com/2009-06-27/wall_street/30009234_1_mortgage-standards-lending-standards-mortgage-rates
As with all well intended legislation this one's original intent was modified when the regulators of the banks used CRA as an "incentive" to obtain certain bank behavior.
In the following post, John Carney, tells the story of how the Act ended up causing the 2008 Housing "Bubble." By the way, he did not believe the CRA was the cause until he did his research. It is interesting reading as it confirms what we have been saying for years.
Conservative Tom
Here is the link:
http://articles.businessinsider.com/2009-06-27/wall_street/30009234_1_mortgage-standards-lending-standards-mortgage-rates
