FDIC Chairman Sheila Bair on CRA

WASHINGTON - APRIL 09:  Chairman of the Federa...Image by Getty Images via DaylifeCommunity Reinvestment Act – Not Guilty!

Since the crisis began, there’s more finger pointing that you can shake a stick at. At least some of that pointing has been at the CRA. The chairman of the FDIC has come out recently with a statement on the subject.

As she explains in the quotes below, the CRA was NOT the cause of the current crisis. I particularly like this part:

“Where in the CRA does it say to make loans to people who can’t afford to repay? Nowhere.”

From HousingWire.com via TheBigPicture:

“I want to give you my verdict on CRA: NOT guilty,” said FDIC Chairman Sheila Bair, according to a press release by the Federal Deposit Insurance Corporation. Before the Consumer Federation of America, Bair said Thursday she wanted to clear up the “myth” that the Community Reinvestment Act caused the financial crisis — and she set out to do so with vigor.

The Community Reinvestment Act — or CRA — is a federal law designed to encourage commercial banks and savings associations to meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods. It has largely been criticized by conservative members of the GOP as promoting predatory lending practices.

“Point in fact,” she said, “only one in four higher-priced first mortgage loans were made by CRA-covered banks during the hey-day years of subprime mortgage lending. The rest were made by private independent mortgage companies and large bank affiliates not covered by CRA rules.

And “Let me ask you,” she proceeded. “Where in the CRA does it say to make loans to people who can’t afford to repay? Nowhere.” The facts are simple, Bair said. The lending practices that are causing problems today were driven by a desire for more market share and revenue growth, not because the government encouraged certain lending practices.”

3 Out Of 4 Subprime Loans

Three fourths of those subprime loans were made by companies NOT COVERED by CRA rules. If you’re looking for something – or someone – to blame, you’ll just have to look somewhere else.

The CRA was not at fault.

I am Jon, and that’s a fact.

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3 Replies to “FDIC Chairman Sheila Bair on CRA”

  1. HOGWASH!! BIll Clinton beat up banks under the CRA(P) to make loans to people who could not or would not pay their loans. I was a banker and I was there. ACORN caused immense problems for those banks not getting a favorable CRA(P) rating. Clinton then put his cronies running FNMA and FREDDIE who then paid bribes–oops,campaign contributions, to the Barne Franks and Chris Dodds of Congress to protect Fannie and Freddie from those people who saw what was about to happen. Clinton also approved securitization of mortgages which casue this whole mess. Now we have all of the EX Clinton people in Obama’s administration. Some Change!!

  2. ‘I was a banker and I was there.’

    To me, sir, that says it all.

    (Although you do have a point with the Obama comment…)

  3. So if this all happened as you say during the Clinton years, why didn’t teh Bush guys change the laws or policies?

    By the way, wasn’t the GOP in charge of congress during the majority of the Clinton years?

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