"Emancipate yourself from mental slavery, none but ourselves can free our mind.” - Bob Marley

Thursday, October 2, 2008

More on the Idiotic "CRA-and-GSEs-Caused-This" Meme

Barry Ritholtz in this article puts more nails in the coffin:

These memes have become a rallying cry -- cognitive dissonance writ large -- of those folks who have been pushing for greater and greater deregulation, and are now attempting to disown the results of their handiwork.

• Did the 1977 legislation, or any other legislation since, require banks to not verify income or payment history of mortgage applicants?

• 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision; another 30% were made by banks or thrifts which are not subject to routine supervision or examinations. How was this caused by either CRA or GSEs ?

• What about "No Money Down" Mortgages (0% down payments) ? Were they required by the CRA? Fannie? Freddie?

Explain the shift in Loan to value from 80% to 120%: What was it in the Act that changed this traditional lending requirement?

Did any Federal legislation require real estate agents and mortgage writers to use the same corrupt appraisers again and again? How did they manage to always come in at exactly the purchase price, no matter what?

• Did the CRA require banks to develop automated underwriting (AU) systems that emphasized speed rather than accuracy in order to process the greatest number of mortgage apps as quickly as possible?

How exactly did legislation force Moody's, S&Ps and Fitch to rate junk paper as Triple AAA?

• What about piggy back loans? Were banks required by Congress to lend the first mortgage and do a HELOC for the down payment -- at the same time?

Internal bank memos showed employees how to cheat the system to get poor mortgages prospects approved that shouldn't have been: Titled How to Get an "Iffy" loan approved at JPM Chase. (Was circulating that memo also a FNM/FRE/CRA requirement?)

The four biggest problem areas for housing (by price decreases) are: Phoenix, Arizona; Las Vegas, Nevada; Miami, Florida, and San Diego, California. Explain exactly how these affluent, non-minority regions were impacted by the Community Reinvesment Act ?

• Did the GSEs require banks to not check credit scores? Assets? Income?

What was it about the CRA or GSEs that mandated fund managers load up on an investment product that was hard to value, thinly traded, and poorly understood

• What was it in the Act that forced banks to make "interest only" loans? Were "Neg Am loans" also part of the legislative requirements also?

• Consider this February 2003 speech by Countrywide CEO Angelo Mozlilo at the American Bankers National Real Estate Conference. He advocated zero down payment mortgages -- was that a CRA requirement too, or just a grab for more market share, and bad banking?



OBloodyHell said...

> • Did the 1977 legislation, or any other legislation since, require banks to not verify income or payment history of mortgage applicants?

I'm sorry -- if you are starting out with this, you're probably flat-out lying with the rest of your arguments, too, even if I lack the data to demonstrate that.

It's a distortion at best, a "lie by omission" in reality...

It's a KNOWN FACT that the CRA and the ideals behind it were used as an extortion technique on banks to make them lower their standards for CRA-type loans. Banks which did not make a sufficient percentage of loans to minorities -- no matter how justified -- were accused of racism and racist policies, and were openly threatened with not just boycotts but also protesting and serious negative media exposure.

I'm sorry, there IS an admitted distinction between being "forced" into lowering standards by a law and being "coerced" into doing it, but it's a distinction without a difference when the end results are examined.

When there is a law on the books calling for "increased minority loans", then the threat of having the NAACP and other organizations out on your front doorstep picketting you, and threatening you with class-action suits for violating peoples' civil rights -- you're probably going to cave.

So starting out with that argument that "no body was actually forced to do anything" is like saying that you weren't "forced to strangle that man" just because I happened to be pointing a gun threateningly at your wife's head and telling you to do it "or else". "Hey, I wasn't pointing it at YOOOOOOOOOuuuuuuuuu!"

I stopped reading it right there. Anything which starts out with a blatant defacto lie such as that isn't worth my time refuting or fisking.

Gimme a break, bob.

bobn said...


Let's reformat that first point:

Did the 1977 legislation, or any other legislation since, require banks to not verify income or payment history of mortgage applicants?

Nothing in the CRA caused the NINJA loans. The NINJA loans were the problem.

Nothing in CRA caused the Alt-A loans that are starting to explode now.

Nothing in the CRA caused the Option ARM loans that are starting to explode now.

I consider my point more than proven. Believe what you will.

About Me

I'm a 57 year old geek. I voted Democratic for 20 years, because I disliked the Republicans more. But now, nobody really speaks for me. I'm for Guns, for more correct government regulation of the financial world, against illegal immigration and amnesty. (in 2008 I ended up voting Republican - too many questions about Obama, and voting against anybody who voted for TARP 1.) In 2010 I voted a stright republican ticket because the Democrats have completely lost their minds.