09-20-2008, 11:54 AM
What the Community Reinvestment Act did was break the redline that kept people in working-class, and in some cases, middle-class, city neighborhoods from getting mortgages. It broke the stranglehold that slumlords held on these neighborhoods and improved these neighborhoods to the point that people who managed to buy houses in the 1990 could sell them at a profit in the 2000s. Shame on the CRA.
The CRA did not legislate, nor did it dictate, no-doc loans, interest-only loans, mortgage-backed securities, or any of the other nonsense in which the financiers indulged. It did not make them necessary either. It did not dictate that real estate agents and mortgage brokers sell people loans that they knew they would not be able to afford after a year or so. All the CRA did was inform the banks that if they were going to make a boatload of money lending in "good" neighborhoods, they would have to turn some of that profit over to "marginal" neighborhoods and lend there too. It worked a treat. It the financiers had dealt responsibly, we would still be bubbling happily along, albeit with smaller bubbles and lower profit--but the profit would still be coming in.
I know people on both sides of the CRA--community organizers and bankers--and they like the act. It has done a lot of good. If you have a neighborhood near you that used to be marginal but is looking better these days, with paint and renovation and new people moving in, chances are the CRA had a hand in it.
The CRA did not legislate, nor did it dictate, no-doc loans, interest-only loans, mortgage-backed securities, or any of the other nonsense in which the financiers indulged. It did not make them necessary either. It did not dictate that real estate agents and mortgage brokers sell people loans that they knew they would not be able to afford after a year or so. All the CRA did was inform the banks that if they were going to make a boatload of money lending in "good" neighborhoods, they would have to turn some of that profit over to "marginal" neighborhoods and lend there too. It worked a treat. It the financiers had dealt responsibly, we would still be bubbling happily along, albeit with smaller bubbles and lower profit--but the profit would still be coming in.
I know people on both sides of the CRA--community organizers and bankers--and they like the act. It has done a lot of good. If you have a neighborhood near you that used to be marginal but is looking better these days, with paint and renovation and new people moving in, chances are the CRA had a hand in it.