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Author Topic: NBER: Yep, Bill Clinton, Andrew Cuomo, and Janet Reno Were Directly Responsible  (Read 206 times)
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1911A
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"Stand Your Ground" by Charles McNaughton


« on: February 11, 2013, 02:10:24 PM »

... for the 2008 Mortgage Meltdown

"... The National Bureau for Economic Research (NBER) just put the final nail in the coffin.

    Democrats and the media insist the Community Reinvestment Act, the anti-redlining law beefed up by President Clinton, had nothing to do with the subprime mortgage crisis and recession... But a new study by the respected National Bureau of Economic Research finds, "Yes, it did. We find that adherence to that act led to riskier lending by banks."

    Added NBER: "There is a clear pattern of increased defaults for loans made by these banks in quarters around the (CRA) exam. Moreover, the effects are larger for loans made within CRA tracts," or predominantly low-income and minority areas.

    To satisfy CRA examiners, "flexible" lending by large banks rose an average 5% and those loans defaulted about 15% more often... The strongest link between CRA lending and defaults took place in the runup to the crisis — 2004 to 2006 — when banks rapidly sold CRA mortgages for securitization by Fannie Mae and Freddie Mac and Wall Street.

    CRA regulations are at the core of Fannie's and Freddie's so-called affordable housing mission. In the early 1990s, a Democrat Congress gave HUD the authority to set and enforce (through fines) CRA-grade loan quotas at Fannie and Freddie... It passed a law requiring the government-backed agencies to "assist insured depository institutions to meet their obligations under the (CRA)." The goal was to help banks meet lending quotas by buying their CRA loans.
    But they had to loosen underwriting standards to do it. And that's what they did.

    "We want your CRA loans because they help us meet our housing goals," Fannie Vice Chair Jamie Gorelick beseeched lenders gathered at a banking conference in 2000, just after HUD hiked the mortgage giant's affordable housing quotas to 50% and pressed it to buy more CRA-eligible loans to help meet those new targets. "We will buy them from your portfolios or package them into securities."

    She described "CRA-friendly products" as mortgages with less than "3% down" and "flexible underwriting." ... From 2001-2007, Fannie and Freddie bought roughly half of all CRA home loans, most carrying subprime features.

    ...Obama officials, who are cracking the CRA whip anew against banks, insist the law played no role in the mortgage meltdown... While the 1977 law was passed 30 years before the crisis, it underwent a major overhaul just 10 years earlier. Starting in 1995, banks were measured on their use of innovative and flexible" lending standards, which included reduced down payments and credit requirements.

    Banks that didn't meet Clinton's tough new numerical lending targets were denied merger plans, among other penalties. CRA shakedown groups like Acorn held hostage the merger plans of banks like Citibank and Washington Mutual until they pledged more loans to credit-poor minorities... WaMu CEO Kerry Killinger has blamed the CRA for his bank's overexposure to risky loans. He said he wanted to tighten lending requirements, but "such measures would have presented other issues such as the company's CRA rating and its commitment to serving its (low-income and minority) customers and communities."


Yep, you read that right; CRA has been revved up and reinvigorated.  Because it worked so well the first time ......
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« Reply #1 on: February 11, 2013, 05:03:40 PM »

True to form, the administration believes that we need more government spending.  But I think that somehow the old order of things changed.  We used to say "tax and spend".  I think now it has become "spend and tax".  

http://www.bloomberg.com/news/2013-02-10/obama-to-propose-spending-to-boost-jobs-in-state-of-union-speech.html

So first we spend:
The president will offer proposals for spending on infrastructure, clean energy and education, according to a senior official briefed on the speech. He will also stress the agenda laid out in his inauguration address, pushing Congress for action on immigration, gun control and climate change.

And then we tax:
Senate Democrats are close to proposing a $120 billion plan for a 10-month delay in the cuts, according to a Senate Democratic aide. The plan would set a minimum 30 percent effective tax rate for the highest earners, a provision known as the “Buffett Rule” after billionaire investor Warren Buffett. It would also deny companies the ability to deduct the costs of moving jobs and investments out of the U.S., the aide said.

I guess maybe the order isn't all that relevant, but with the demise of PAYGO, there are virtually no controls on government spending at this time.
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There are two ways to conquer and enslave a country. One is by the sword. The other is by debt. - John Adams
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