g5000
Diamond Member
- Nov 26, 2011
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Part VI
It's going to get really complicated from here. This is usually where the hacks' eyes glaze over. But stick with me. I will keep it as simple as possible.
All right.
First, I will touch on the CRA. The Community Reinvestment Act. This was a law passed during the Carter Administration which required banks to make a certain percentage of their loans to minorities. That's because banks had, up to that time, practiced something called "redlining".
Redlining is the practice of not making loans to negroes who want to live where you don't want them to live. The banks would literally draw red lines on maps where white people did not want any negroes moving in. The banks coordinated to keep negroes in a tight geographical area.
They really screwed the pooch, and so the federal government stepped in with all kinds of equal opportunity laws, one of which was the CRA.
Somehow, the bigots have gotten it into their pointy heads that this 1970s law somehow suddenly caused a subprime bubble 30 years later!
When I am done, you will understand how they got this completely backwards, upside down, and just plain wrong.
But for now you need to know that not one single broker-dealer was subject to the CRA. The CRA had no jurisdiction over the broker-dealers.
I am not kidding. Not Lehman, not Bear Stearns, not Merrill, not Goldman, not any of them.
So much for the CRA...
But before we dig deeper into that, I have to explain what a CDO is, and what the Commodities Futures Modernization Act (FDMA) is.
It's going to get really complicated from here. This is usually where the hacks' eyes glaze over. But stick with me. I will keep it as simple as possible.
All right.
First, I will touch on the CRA. The Community Reinvestment Act. This was a law passed during the Carter Administration which required banks to make a certain percentage of their loans to minorities. That's because banks had, up to that time, practiced something called "redlining".
Redlining is the practice of not making loans to negroes who want to live where you don't want them to live. The banks would literally draw red lines on maps where white people did not want any negroes moving in. The banks coordinated to keep negroes in a tight geographical area.
They really screwed the pooch, and so the federal government stepped in with all kinds of equal opportunity laws, one of which was the CRA.
Somehow, the bigots have gotten it into their pointy heads that this 1970s law somehow suddenly caused a subprime bubble 30 years later!
When I am done, you will understand how they got this completely backwards, upside down, and just plain wrong.
But for now you need to know that not one single broker-dealer was subject to the CRA. The CRA had no jurisdiction over the broker-dealers.
I am not kidding. Not Lehman, not Bear Stearns, not Merrill, not Goldman, not any of them.
So much for the CRA...
But before we dig deeper into that, I have to explain what a CDO is, and what the Commodities Futures Modernization Act (FDMA) is.