We should all agree with this!

[EdwardBaiamonte]

When you didn't lend to poor risks in poor neighborhoods, Jesse Jackson and Barack Obama protested. When banks increased loans in those poor neighborhoods, they had more loans default.

REALLY? SOURCE?

So, the changes in policy and worldview that led to the gigantic increases in mortgage lending to minorities seen over the last decade (with total mortgage dollars written per year increasing 691% for Hispanics and 397% for blacks from 1999 to the peak of the Housing Bubble in 2006) unsurprisingly led to world-historical levels of mortgage defaults in 2007-2009. After all, blacks and Hispanics were still defaulting at very high levels when they weren`t getting as much mortgage lending. The law of diminishing marginal returns suggests that throwing more mortgage money at them wasn`t going to improve their credit worthiness.

In 2004-2007, minorities received half of subprime mortgage dollars handed out. A new 2008 Boston Fed study shows minorities in Massachusetts getting foreclosed on subprime loans at twice the race of whites, suggesting that minorities accounted for a sizable majority of subprime dollars defaulted.


But nobody in politics cared, and the study helped Syron get the top job at Freddie Mac, where he earned $38 million while piloting Freddie onto the rocks.

Default rates for 1992 vintage FHA-insured mortgages after 7 years: White: 4.27% Black: 10.81% Hispanic: 13.18%

Default rates for 1992 vintage FHA-insured mortgages after 5 years: White: 4.10% Black: 9.14% Hispanic: 9.47%

Default rates for 1996 vintage FHA-insured mortgages after 3 years: White: 3.34% Black: 6.93% Hispanic: 6.99%

 

[Toddsterpatriot]

We're talking about banks that take deposits, not investment banks.
Try to stay on topic.

You asked what banks failed. And Washington Mutual took deposits.

And why did Lehman fail? They held mortgages bonds financed with overnight money. LOL!

It's more complicated than that. Lehman's failure is a story of control fraud. And this fraud started in 2001, with liars' loans (Alt A) and subprime operations. It's primary source of bullshit income and losses was buy and selling liars' loans through Aurora Loan Services, one of its subsidiaries.



No shit Sherlock



Derivatives played a major role in how the subprime mess unfolded. Jeez, not even the Wall Street Journal denies this.



No shit Sherlock

Fannie Mac and Fannie Mae not banks and didn't fail because of securities trading or derivatives.

They utilized derivatives to increase yield, decrease funding costs, decrease capital volatility, and to limit exposure.

You should take a break, you're more confused than usual.

With all due respect, do you even know what derivatives are and why they're used?

You asked what banks failed. And Washington Mutual took deposits.

Try again?

Which banks got in trouble because of securities trading? Or derivatives?

 

[Dad2three]

When you didn't lend to poor risks in poor neighborhoods, Jesse Jackson and Barack Obama protested. When banks increased loans in those poor neighborhoods, they had more loans default.
Clear yet?

When you didn't lend to poor risks in poor neighborhoods, Jesse Jackson and Barack Obama protested. When banks increased loans in those poor neighborhoods, they had more loans default.

REALLY? SOURCE?

Examining the big lie: How the facts of the economic crisis stack up



For example, if the CRA was to blame, the housing boom would have been in CRA regions; it would have made places such as Harlem and South Philly and Compton and inner Washington the primary locales of the run up and collapse. Further, the default rates in these areas should have been worse than other regions.

CRA were less likely to default than Subprime Mortgages — Source: University of North Carolina at Chapel Hill

What occurred was the exact opposite: The suburbs boomed and busted and went into foreclosure in much greater numbers than inner cities. The tiny suburbs and exurbs of South Florida and California and Las Vegas and Arizona were the big boomtowns, not the low-income regions. The redlined areas the CRA address missed much of the boom; places that busted had nothing to do with the CRA.

Examining the big lie: How the facts of the economic crisis stack up | The Big Picture


LOL

Did the Community Reinvestment Act (CRA) Lead to Risky Lending?

Yes, it did. We use exogenous variation in banks’ incentives to conform to the standards of the Community Reinvestment Act (CRA) around regulatory exam dates to trace out the effect of the CRA on lending activity. Our empirical strategy compares lending behavior of banks undergoing CRA exams within a given census tract in a given month to the behavior of banks operating in the same census tract-month that do not face these exams. We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks. The effects are strongest during the time period when the market for private securitization was booming.


Did the Community Reinvestment Act (CRA) Lead to Risky Lending? by Sumit Agarwal, Effi Benmelech, Nittai Bergman, Amit Seru :: SSRN

LOL!

DEBUNKING THE CRA MYTH – AGAIN

One of the pernicious myths surrounding CRA is that it encouraged banks to make risky loans to low‐ and moderate‐income borrowers.

This argument has been made primarily by conservative think tanks, like American Enterprise Institute, who find it convenient to include CRA in their general position against governmental intervention in the private market.

But efforts to blame CRA for the most recent crisis reflect a deep misunderstanding of the scope and scale of CRA and its implementation. Indeed, the “blame the CRA” story has been refuted by industry leaders and researchers time and time again. Unfortunately, this narrative refuses to go away.

In this paper, center researchers review the research evidence on CRA and show that there is no credible research to support the assertion that CRA contributed to an increase in risky lending during the subprime boom. In particular, they present a detailed rebuttal of a recent paper published by the National Bureau of Economic Research, (ALL AEI GUYS) titled “Did the Community Reinvestment Act Lead to Risky Lending,” which purports to find evidence that “yes, it did.” The study is severely flawed, both in terms of the empirical analysis and in the authors’ interpretation of the results, and thus fails to contribute to the existing literature on both the strengths and weaknesses of CRA.

UNC Center for Community Capital


Q Did the Community Reinvestment Act under Carter/Clinton caused it?


A "Since 1995 there has been essentially no change in the basic CRA rules or enforcement process that can be reasonably linked to the subprime lending activity. This fact weakens the link between the CRA and the current crisis since the crisis is rooted in poor performance of mortgage loans made between 2004 and 2007. "


http://www.federalreserve.gov/newsevents/speech/20081203_analysis.pdf


Bush’s President’s Working Group on Financial Markets October 2008

“The Presidents Working Group’s March policy statement acknowledged that turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007.”


LOL

 

[Dad2three]

When you didn't lend to poor risks in poor neighborhoods, Jesse Jackson and Barack Obama protested. When banks increased loans in those poor neighborhoods, they had more loans default.
Clear yet?

When you didn't lend to poor risks in poor neighborhoods, Jesse Jackson and Barack Obama protested. When banks increased loans in those poor neighborhoods, they had more loans default.

REALLY? SOURCE?

Examining the big lie: How the facts of the economic crisis stack up



For example, if the CRA was to blame, the housing boom would have been in CRA regions; it would have made places such as Harlem and South Philly and Compton and inner Washington the primary locales of the run up and collapse. Further, the default rates in these areas should have been worse than other regions.

CRA were less likely to default than Subprime Mortgages — Source: University of North Carolina at Chapel Hill

What occurred was the exact opposite: The suburbs boomed and busted and went into foreclosure in much greater numbers than inner cities. The tiny suburbs and exurbs of South Florida and California and Las Vegas and Arizona were the big boomtowns, not the low-income regions. The redlined areas the CRA address missed much of the boom; places that busted had nothing to do with the CRA.

Examining the big lie: How the facts of the economic crisis stack up | The Big Picture


LOL

Did the Community Reinvestment Act (CRA) Lead to Risky Lending?

Yes, it did. We use exogenous variation in banks’ incentives to conform to the standards of the Community Reinvestment Act (CRA) around regulatory exam dates to trace out the effect of the CRA on lending activity. Our empirical strategy compares lending behavior of banks undergoing CRA exams within a given census tract in a given month to the behavior of banks operating in the same census tract-month that do not face these exams. We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks. The effects are strongest during the time period when the market for private securitization was booming.


Did the Community Reinvestment Act (CRA) Lead to Risky Lending? by Sumit Agarwal, Effi Benmelech, Nittai Bergman, Amit Seru :: SSRN

LOL!

One would think that understanding that loans made by CRA banks in CRA areas reached their height in 1994 and steadily decreased right through the bubble would convince even the most stubborn ideologue to look elsewhere.



UNDERSTANDING THE BOOM AND BUST IN NONPRIME MORTGAGE LENDING

http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/ubb10-1.pdf

But like the 40% loss of market share of the GSEs during the bubble, the almost equal market share loss of CRA banks means nothing. Instead, we have to listen to people talking about a bubble caused by banks that were losing business, and in the case of CRA banks, steadily losing business over a ten year period.

In my opinion there are only two ways to deal with Cognitive Dissidents; Prozac or a baseball bat. One they have to administer themselves, one I would be happy to administer(particularly to the CRA DID IT! group).

 

[Dad2three]

When you didn't lend to poor risks in poor neighborhoods, Jesse Jackson and Barack Obama protested. When banks increased loans in those poor neighborhoods, they had more loans default.

REALLY? SOURCE?

So, the changes in policy and worldview that led to the gigantic increases in mortgage lending to minorities seen over the last decade (with total mortgage dollars written per year increasing 691% for Hispanics and 397% for blacks from 1999 to the peak of the Housing Bubble in 2006) unsurprisingly led to world-historical levels of mortgage defaults in 2007-2009. After all, blacks and Hispanics were still defaulting at very high levels when they weren`t getting as much mortgage lending. The law of diminishing marginal returns suggests that throwing more mortgage money at them wasn`t going to improve their credit worthiness.

In 2004-2007, minorities received half of subprime mortgage dollars handed out. A new 2008 Boston Fed study shows minorities in Massachusetts getting foreclosed on subprime loans at twice the race of whites, suggesting that minorities accounted for a sizable majority of subprime dollars defaulted.


But nobody in politics cared, and the study helped Syron get the top job at Freddie Mac, where he earned $38 million while piloting Freddie onto the rocks.

Default rates for 1992 vintage FHA-insured mortgages after 7 years: White: 4.27% Black: 10.81% Hispanic: 13.18%

Default rates for 1992 vintage FHA-insured mortgages after 5 years: White: 4.10% Black: 9.14% Hispanic: 9.47%

Default rates for 1996 vintage FHA-insured mortgages after 3 years: White: 3.34% Black: 6.93% Hispanic: 6.99%

Got it, you are a racist too...



Q When did the Bush Mortgage Bubble start?

A The general timeframe is it started late 2004.

From Bush’s President’s Working Group on Financial Markets October 2008

“The Presidents Working Group’s March policy statement acknowledged that turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007.”



Q Did the Community Reinvestment Act under Carter/Clinton caused it?


A "Since 1995 there has been essentially no change in the basic CRA rules or enforcement process that can be reasonably linked to the subprime lending activity. This fact weakens the link between the CRA and the current crisis since the crisis is rooted in poor performance of mortgage loans made between 2004 and 2007. "

http://www.federalreserve.gov/newsevents/speech/20081203_analysis.pdf



"Another form of easing facilitated the rapid rise of mortgages that didn't require borrowers to fully document their incomes. In 2006, these low- or no-doc loans comprised 81 percent of near-prime, 55 percent of jumbo, 50 percent of subprime and 36 percent of prime securitized mortgages."

Q HOLY JESUS! DID YOU JUST PROVE THAT OVER 50 % OF ALL MORTGAGES IN 2006 DIDN’T REQUIRE BORROWERS TO DOCUMENT THEIR INCOME?!?!?!?

A Yes.




Q WHO THE HELL LOANS HUNDREDS OF THOUSANDS OF DOLLARS TO PEOPLE WITHOUT CHECKING THEIR INCOMES?!?!?

A Banks.

Q WHY??!?!!!?!

A Two reasons, greed and Bush's regulators let them.

http://www.usmessageboard.com/economy/362889-facts-on-dubya-s-great-recession.html

 

[EdwardBaiamonte]

Got it, you are a racist too...

any reason to think that or must you again admit as a typical liberal you lack the IQ to support what you say?

 

[Dad2three]

Got it, you are a racist too...

any reason to think that or must you again admit as a typical liberal you lack the IQ to support what you say?

Just go back to your post Bubba, Banksters didn't collapse lending standards because of race, HINT:


It is clear to anyone who has studied the financial crisis of 2008 that the private sector’s drive for short-term profit was behind it.


Lest We Forget: Why We Had A Financial Crisis - Forbes

 

[EdwardBaiamonte]

any reason to think that or must you again admit as a typical liberal you lack the IQ to support what you say?

Just go back to your post Bubba, Banksters didn't collapse lending standards because of race,

[/QUOTE]

but exactly how does that make me a racist?

 

[Dad2three]

any reason to think that or must you again admit as a typical liberal you lack the IQ to support what you say?

Just go back to your post Bubba, Banksters didn't collapse lending standards because of race,

but exactly how does that make me a racist?[/QUOTE]


What makes you a racists I'm not sure, how you've shown you are a racists is your post implying that loans done under Clinton, were somehow linked to Dubya's subprime crisis

"First, not only were borrowers of color more likely to receive subprime loans than white borrowers, but within the subprime market, borrowers of color were more likely to receive the most expensive loans and were more likely to receive subprime terms associated with increased default risk, such as prepayment penalties. Previous research has shown that African-American and Latino borrowers were about 30% more likely to receive the highest-cost subprime loans relative to white subprime borrowers with similar risk profiles and that subprime loans in communities of color were more likely to carry prepayment penalties than subprime loans in majority communities


http://www.responsiblelending.org/m...alysis/foreclosures-by-race-and-ethnicity.pdf

 

[EdwardBaiamonte]

how you've shown you are a racists is your post implying that loans done under Clinton, were somehow linked to Dubya's subprime crisis

can the idiot liberal explain what that has to do with racism?

 

[Dad2three]

how you've shown you are a racists is your post implying that loans done under Clinton, were somehow linked to Dubya's subprime crisis

can the idiot liberal explain what that has to do with racism?

Nope Bubba, You are doing a good job of that

 

[EdwardBaiamonte]

how you've shown you are a racists is your post implying that loans done under Clinton, were somehow linked to Dubya's subprime crisis

can the idiot liberal explain what that has to do with racism?

Nope Bubba, You are doing a good job of that

I'm doing a good job of explaining what the idiot liberal(you) said it has to do with racism???
How is that even possible. See why we say slow? Your ability to defend your charge of racism is typical of your overall ability to defend anything you say. Sorry but you know its true.

 

[The Rabbi]

can the idiot liberal explain what that has to do with racism?

Nope Bubba, You are doing a good job of that

I'm doing a good job of explaining what the idiot liberal(you) said it has to do with racism???
How is that even possible. See why we say slow? Your ability to defend your charge of racism is typical of your overall ability to defend anything you say. Sorry but you know its true.

Ed, you're at fault here. You're feeding an obvious smelly troll. A crack addicted troll I might add.

 

[Toddsterpatriot]

When you didn't lend to poor risks in poor neighborhoods, Jesse Jackson and Barack Obama protested. When banks increased loans in those poor neighborhoods, they had more loans default.

REALLY? SOURCE?

Examining the big lie: How the facts of the economic crisis stack up



For example, if the CRA was to blame, the housing boom would have been in CRA regions; it would have made places such as Harlem and South Philly and Compton and inner Washington the primary locales of the run up and collapse. Further, the default rates in these areas should have been worse than other regions.

CRA were less likely to default than Subprime Mortgages — Source: University of North Carolina at Chapel Hill

What occurred was the exact opposite: The suburbs boomed and busted and went into foreclosure in much greater numbers than inner cities. The tiny suburbs and exurbs of South Florida and California and Las Vegas and Arizona were the big boomtowns, not the low-income regions. The redlined areas the CRA address missed much of the boom; places that busted had nothing to do with the CRA.

Examining the big lie: How the facts of the economic crisis stack up | The Big Picture


LOL

Did the Community Reinvestment Act (CRA) Lead to Risky Lending?

Yes, it did. We use exogenous variation in banks’ incentives to conform to the standards of the Community Reinvestment Act (CRA) around regulatory exam dates to trace out the effect of the CRA on lending activity. Our empirical strategy compares lending behavior of banks undergoing CRA exams within a given census tract in a given month to the behavior of banks operating in the same census tract-month that do not face these exams. We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks. The effects are strongest during the time period when the market for private securitization was booming.


Did the Community Reinvestment Act (CRA) Lead to Risky Lending? by Sumit Agarwal, Effi Benmelech, Nittai Bergman, Amit Seru :: SSRN

LOL!

DEBUNKING THE CRA MYTH – AGAIN

One of the pernicious myths surrounding CRA is that it encouraged banks to make risky loans to low‐ and moderate‐income borrowers.

This argument has been made primarily by conservative think tanks, like American Enterprise Institute, who find it convenient to include CRA in their general position against governmental intervention in the private market.

But efforts to blame CRA for the most recent crisis reflect a deep misunderstanding of the scope and scale of CRA and its implementation. Indeed, the “blame the CRA” story has been refuted by industry leaders and researchers time and time again. Unfortunately, this narrative refuses to go away.

In this paper, center researchers review the research evidence on CRA and show that there is no credible research to support the assertion that CRA contributed to an increase in risky lending during the subprime boom. In particular, they present a detailed rebuttal of a recent paper published by the National Bureau of Economic Research, (ALL AEI GUYS) titled “Did the Community Reinvestment Act Lead to Risky Lending,” which purports to find evidence that “yes, it did.” The study is severely flawed, both in terms of the empirical analysis and in the authors’ interpretation of the results, and thus fails to contribute to the existing literature on both the strengths and weaknesses of CRA.

UNC Center for Community Capital


Q Did the Community Reinvestment Act under Carter/Clinton caused it?


A "Since 1995 there has been essentially no change in the basic CRA rules or enforcement process that can be reasonably linked to the subprime lending activity. This fact weakens the link between the CRA and the current crisis since the crisis is rooted in poor performance of mortgage loans made between 2004 and 2007. "


http://www.federalreserve.gov/newsevents/speech/20081203_analysis.pdf


Bush’s President’s Working Group on Financial Markets October 2008

“The Presidents Working Group’s March policy statement acknowledged that turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007.”


LOL

Your post did not refute this.

We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks.

Try again?

 

[Dad2three]

Did the Community Reinvestment Act (CRA) Lead to Risky Lending?

Yes, it did. We use exogenous variation in banks’ incentives to conform to the standards of the Community Reinvestment Act (CRA) around regulatory exam dates to trace out the effect of the CRA on lending activity. Our empirical strategy compares lending behavior of banks undergoing CRA exams within a given census tract in a given month to the behavior of banks operating in the same census tract-month that do not face these exams. We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks. The effects are strongest during the time period when the market for private securitization was booming.


Did the Community Reinvestment Act (CRA) Lead to Risky Lending? by Sumit Agarwal, Effi Benmelech, Nittai Bergman, Amit Seru :: SSRN

LOL!

DEBUNKING THE CRA MYTH – AGAIN

One of the pernicious myths surrounding CRA is that it encouraged banks to make risky loans to low‐ and moderate‐income borrowers.

This argument has been made primarily by conservative think tanks, like American Enterprise Institute, who find it convenient to include CRA in their general position against governmental intervention in the private market.

But efforts to blame CRA for the most recent crisis reflect a deep misunderstanding of the scope and scale of CRA and its implementation. Indeed, the “blame the CRA” story has been refuted by industry leaders and researchers time and time again. Unfortunately, this narrative refuses to go away.

In this paper, center researchers review the research evidence on CRA and show that there is no credible research to support the assertion that CRA contributed to an increase in risky lending during the subprime boom. In particular, they present a detailed rebuttal of a recent paper published by the National Bureau of Economic Research, (ALL AEI GUYS) titled “Did the Community Reinvestment Act Lead to Risky Lending,” which purports to find evidence that “yes, it did.” The study is severely flawed, both in terms of the empirical analysis and in the authors’ interpretation of the results, and thus fails to contribute to the existing literature on both the strengths and weaknesses of CRA.

UNC Center for Community Capital


Q Did the Community Reinvestment Act under Carter/Clinton caused it?


A "Since 1995 there has been essentially no change in the basic CRA rules or enforcement process that can be reasonably linked to the subprime lending activity. This fact weakens the link between the CRA and the current crisis since the crisis is rooted in poor performance of mortgage loans made between 2004 and 2007. "


http://www.federalreserve.gov/newsevents/speech/20081203_analysis.pdf


Bush’s President’s Working Group on Financial Markets October 2008

“The Presidents Working Group’s March policy statement acknowledged that turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007.”


LOL

Your post did not refute this.

We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks.

Try again?

The study is severely flawed, both in terms of the empirical analysis and in the authors’ interpretation of the results, and thus fails to contribute to the existing literature on both the strengths and weaknesses of CRA.

UNC Center for Community Capital


HINT, 80%+ OF ALL LOANS DIDN'T ORIGINATE IN BANKS 2004-2007, THOSE THINGS CRA COVERED!


" turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007."

LOL

 

[Dad2three]

Did the Community Reinvestment Act (CRA) Lead to Risky Lending?

Yes, it did. We use exogenous variation in banks’ incentives to conform to the standards of the Community Reinvestment Act (CRA) around regulatory exam dates to trace out the effect of the CRA on lending activity. Our empirical strategy compares lending behavior of banks undergoing CRA exams within a given census tract in a given month to the behavior of banks operating in the same census tract-month that do not face these exams. We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks. The effects are strongest during the time period when the market for private securitization was booming.


Did the Community Reinvestment Act (CRA) Lead to Risky Lending? by Sumit Agarwal, Effi Benmelech, Nittai Bergman, Amit Seru :: SSRN

LOL!

DEBUNKING THE CRA MYTH – AGAIN

One of the pernicious myths surrounding CRA is that it encouraged banks to make risky loans to low‐ and moderate‐income borrowers.

This argument has been made primarily by conservative think tanks, like American Enterprise Institute, who find it convenient to include CRA in their general position against governmental intervention in the private market.

But efforts to blame CRA for the most recent crisis reflect a deep misunderstanding of the scope and scale of CRA and its implementation. Indeed, the “blame the CRA” story has been refuted by industry leaders and researchers time and time again. Unfortunately, this narrative refuses to go away.

In this paper, center researchers review the research evidence on CRA and show that there is no credible research to support the assertion that CRA contributed to an increase in risky lending during the subprime boom. In particular, they present a detailed rebuttal of a recent paper published by the National Bureau of Economic Research, (ALL AEI GUYS) titled “Did the Community Reinvestment Act Lead to Risky Lending,” which purports to find evidence that “yes, it did.” The study is severely flawed, both in terms of the empirical analysis and in the authors’ interpretation of the results, and thus fails to contribute to the existing literature on both the strengths and weaknesses of CRA.

UNC Center for Community Capital


Q Did the Community Reinvestment Act under Carter/Clinton caused it?


A "Since 1995 there has been essentially no change in the basic CRA rules or enforcement process that can be reasonably linked to the subprime lending activity. This fact weakens the link between the CRA and the current crisis since the crisis is rooted in poor performance of mortgage loans made between 2004 and 2007. "


http://www.federalreserve.gov/newsevents/speech/20081203_analysis.pdf


Bush’s President’s Working Group on Financial Markets October 2008

“The Presidents Working Group’s March policy statement acknowledged that turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007.”


LOL

Your post did not refute this.

We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks.

Try again?

A LAW AROUND SINCE 1977 AND WEAKENED ENFORCEMENT UNDER DUBYA CAUSED THIS:


November 27, 2007

A Snapshot of the Subprime Market



Dollar amount of subprime loans outstanding:

2007 $1.3 trillion

Dollar amount of subprime loans outstanding in 2003: $332 billion

Percentage increase from 2003: 292%


Number of subprime mortgages made in 2005-2006 projected to end in foreclosure:

1 in 5



Proportion of subprime mortgages made from 2004 to 2006 that come with "exploding" adjustable interest rates: 89-93%


Proportion approved without fully documented income: 43-50%


Proportion with no escrow for taxes and insurance: 75%



Proportion of completed foreclosures attributable to adjustable rate loans out of all loans made in 2006 and bundled in subprime mortgage backed securities: 93%


Subprime share of all mortgage originations in 2006: 28%


Subprime share of all mortgage origination in 2003: 8%


A Snapshot of the Subprime Market

 

[Toddsterpatriot]

DEBUNKING THE CRA MYTH – AGAIN

One of the pernicious myths surrounding CRA is that it encouraged banks to make risky loans to low‐ and moderate‐income borrowers.

This argument has been made primarily by conservative think tanks, like American Enterprise Institute, who find it convenient to include CRA in their general position against governmental intervention in the private market.

But efforts to blame CRA for the most recent crisis reflect a deep misunderstanding of the scope and scale of CRA and its implementation. Indeed, the “blame the CRA” story has been refuted by industry leaders and researchers time and time again. Unfortunately, this narrative refuses to go away.

In this paper, center researchers review the research evidence on CRA and show that there is no credible research to support the assertion that CRA contributed to an increase in risky lending during the subprime boom. In particular, they present a detailed rebuttal of a recent paper published by the National Bureau of Economic Research, (ALL AEI GUYS) titled “Did the Community Reinvestment Act Lead to Risky Lending,” which purports to find evidence that “yes, it did.” The study is severely flawed, both in terms of the empirical analysis and in the authors’ interpretation of the results, and thus fails to contribute to the existing literature on both the strengths and weaknesses of CRA.

UNC Center for Community Capital


Q Did the Community Reinvestment Act under Carter/Clinton caused it?


A "Since 1995 there has been essentially no change in the basic CRA rules or enforcement process that can be reasonably linked to the subprime lending activity. This fact weakens the link between the CRA and the current crisis since the crisis is rooted in poor performance of mortgage loans made between 2004 and 2007. "


http://www.federalreserve.gov/newsevents/speech/20081203_analysis.pdf


Bush’s President’s Working Group on Financial Markets October 2008

“The Presidents Working Group’s March policy statement acknowledged that turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007.”


LOL

Your post did not refute this.

We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks.

Try again?

The study is severely flawed, both in terms of the empirical analysis and in the authors’ interpretation of the results, and thus fails to contribute to the existing literature on both the strengths and weaknesses of CRA.

UNC Center for Community Capital


HINT, 80%+ OF ALL LOANS DIDN'T ORIGINATE IN BANKS 2004-2007, THOSE THINGS CRA COVERED!


" turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007."

LOL

HINT, 80%+ OF ALL LOANS DIDN'T ORIGINATE IN BANKS 2004-2007, THOSE THINGS CRA COVERED!

Where did I claim they did?
I claimed CRA forced banks to make loans which then defaulted at a higher rate. Look.

We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks.

Back up for my claim.

 

[Dad2three]

Your post did not refute this.

We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks.

Try again?

The study is severely flawed, both in terms of the empirical analysis and in the authors’ interpretation of the results, and thus fails to contribute to the existing literature on both the strengths and weaknesses of CRA.

UNC Center for Community Capital


HINT, 80%+ OF ALL LOANS DIDN'T ORIGINATE IN BANKS 2004-2007, THOSE THINGS CRA COVERED!


" turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007."

LOL

HINT, 80%+ OF ALL LOANS DIDN'T ORIGINATE IN BANKS 2004-2007, THOSE THINGS CRA COVERED!

Where did I claim they did?
I claimed CRA forced banks to make loans which then defaulted at a higher rate. Look.

We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks.

Back up for my claim.

CRA forced banks to make loans which then defaulted at a higher rate.

LOL, SURE, SURE

The study is severely flawed, both in terms of the empirical analysis and in the authors’ interpretation of the results


One of the pernicious myths surrounding CRA is that it encouraged banks to make risky loans to low‐ and moderate‐income borrowers.

UNC Center for Community Capital





The latest failed effort to blame the Community Reinvestment Act for Accounting Control Fraud


Their thesis statement thesis may seem clear, but it is actually imprecise and arbitrary and reveals disabling errors in their methodology. It fails to exclude alternative explanations for why lending could vary in a time period near a CRA examination. Its imprecision as to when banks supposedly made loans based on the CRA combined with the lack of a convincing causal explanation as to why loans made in this particular time window would have prompted by the CRA while loans outside the window would not be demonstrates fatal flaws in the study’s design.

The study fails to consider alternative explanations


The ABBS (2012) study design also fails to consider a range of other factors relevant to causality that would demonstrate the inability of their thesis to explain the broader pattern of the crisis. I discuss why accounting control fraud provides a superior explanation for the lending pattern that the authors found.


If their thesis were correct then CRA would have produced ever fewer bad loans from 1999 on as the CRA examination frequency was cut sharply for smaller banks by the Gramm Leach Bliley Act from every two years to every five years (ABBS 2012: 11-12). Further, under the Bush administration, CRA supervision became ever weaker compared to the Clinton administration.


The latest failed effort to blame the Community Reinvestment Act for Accounting Control Fraud - New Economic PerspectivesNew Economic Perspectives

 

[Toddsterpatriot]

The study is severely flawed, both in terms of the empirical analysis and in the authors’ interpretation of the results, and thus fails to contribute to the existing literature on both the strengths and weaknesses of CRA.

UNC Center for Community Capital


HINT, 80%+ OF ALL LOANS DIDN'T ORIGINATE IN BANKS 2004-2007, THOSE THINGS CRA COVERED!


" turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007."

LOL

HINT, 80%+ OF ALL LOANS DIDN'T ORIGINATE IN BANKS 2004-2007, THOSE THINGS CRA COVERED!

Where did I claim they did?
I claimed CRA forced banks to make loans which then defaulted at a higher rate. Look.

We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks.

Back up for my claim.

CRA forced banks to make loans which then defaulted at a higher rate.

LOL, SURE, SURE

The study is severely flawed, both in terms of the empirical analysis and in the authors’ interpretation of the results


One of the pernicious myths surrounding CRA is that it encouraged banks to make risky loans to low‐ and moderate‐income borrowers.

UNC Center for Community Capital





The latest failed effort to blame the Community Reinvestment Act for Accounting Control Fraud


Their thesis statement thesis may seem clear, but it is actually imprecise and arbitrary and reveals disabling errors in their methodology. It fails to exclude alternative explanations for why lending could vary in a time period near a CRA examination. Its imprecision as to when banks supposedly made loans based on the CRA combined with the lack of a convincing causal explanation as to why loans made in this particular time window would have prompted by the CRA while loans outside the window would not be demonstrates fatal flaws in the study’s design.

The study fails to consider alternative explanations


The ABBS (2012) study design also fails to consider a range of other factors relevant to causality that would demonstrate the inability of their thesis to explain the broader pattern of the crisis. I discuss why accounting control fraud provides a superior explanation for the lending pattern that the authors found.


If their thesis were correct then CRA would have produced ever fewer bad loans from 1999 on as the CRA examination frequency was cut sharply for smaller banks by the Gramm Leach Bliley Act from every two years to every five years (ABBS 2012: 11-12). Further, under the Bush administration, CRA supervision became ever weaker compared to the Clinton administration.


The latest failed effort to blame the Community Reinvestment Act for Accounting Control Fraud - New Economic PerspectivesNew Economic Perspectives

If their thesis were correct then CRA would have produced ever fewer bad loans from 1999 on as the CRA examination frequency was cut sharply for smaller banks by the Gramm Leach Bliley Act from every two years to every five years

Fewer bad loans is still bad loans. CRA forced banks to make loans which then defaulted at a higher rate.

 

[Dad2three]

HINT, 80%+ OF ALL LOANS DIDN'T ORIGINATE IN BANKS 2004-2007, THOSE THINGS CRA COVERED!

Where did I claim they did?
I claimed CRA forced banks to make loans which then defaulted at a higher rate. Look.

We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks.

Back up for my claim.

CRA forced banks to make loans which then defaulted at a higher rate.

LOL, SURE, SURE

The study is severely flawed, both in terms of the empirical analysis and in the authors’ interpretation of the results


One of the pernicious myths surrounding CRA is that it encouraged banks to make risky loans to low‐ and moderate‐income borrowers.

UNC Center for Community Capital





The latest failed effort to blame the Community Reinvestment Act for Accounting Control Fraud


Their thesis statement thesis may seem clear, but it is actually imprecise and arbitrary and reveals disabling errors in their methodology. It fails to exclude alternative explanations for why lending could vary in a time period near a CRA examination. Its imprecision as to when banks supposedly made loans based on the CRA combined with the lack of a convincing causal explanation as to why loans made in this particular time window would have prompted by the CRA while loans outside the window would not be demonstrates fatal flaws in the study’s design.

The study fails to consider alternative explanations


The ABBS (2012) study design also fails to consider a range of other factors relevant to causality that would demonstrate the inability of their thesis to explain the broader pattern of the crisis. I discuss why accounting control fraud provides a superior explanation for the lending pattern that the authors found.


If their thesis were correct then CRA would have produced ever fewer bad loans from 1999 on as the CRA examination frequency was cut sharply for smaller banks by the Gramm Leach Bliley Act from every two years to every five years (ABBS 2012: 11-12). Further, under the Bush administration, CRA supervision became ever weaker compared to the Clinton administration.


The latest failed effort to blame the Community Reinvestment Act for Accounting Control Fraud - New Economic PerspectivesNew Economic Perspectives

If their thesis were correct then CRA would have produced ever fewer bad loans from 1999 on as the CRA examination frequency was cut sharply for smaller banks by the Gramm Leach Bliley Act from every two years to every five years

Fewer bad loans is still bad loans. CRA forced banks to make loans which then defaulted at a higher rate.

"CRA forced banks"


NOPE

"to make loans which then defaulted at a higher rate"

NOPE


mortgages originated for CRA purposes have performed at much higher rates than loans originated for private securitization, going into foreclosure 60 percent less often than loans originated by independent mortgage companies that were key to providing the mortgages needed to supply private securitization.



http://www.frbsf.org/community-development/files/wp08-051.pdf


Keep trying Bubba

The authors’ failure to provide a coherent logical explanation for their thesis

Note that the authors claim that the CRA led to “risky lending.” That would be very odd given what the authors admit about the CRA’s provisions.

“The Community Reinvestment Act of 1977 instructs federal financial supervisory agencies to encourage their regulated financial institutions to help meet credit needs of the communities in which they are chartered while also conforming to “safe and sound” lending standards



An obvious problem with the authors’ claim that the CRA caused “risky lending” is that the law calls for “safe and sound” lending standards.


If lenders chose to engage in “risky lending” they did so in contravention of the instructions of the CRA and the banking examiners.


The latest failed effort to blame the Community Reinvestment Act for Accounting Control Fraud - New Economic PerspectivesNew Economic Perspectives