Sep. 29th, 2008

johnpalmer: (Default)
There's a meme going around that the Community Reinvestment Act caused the financial problems we're facing in the US.

It's false.

(edit: Hat tip to Sadly, No. Their own post is, shall we say, somewhat unkind towards the rightie bloggers spreading the meme, so I didn't use the direct link here.)


It is true that pushes to encourage home ownership helped things along a little bit. Time was when you couldn't buy a house without a large down payment, and that's changed, and that opened the door to more loans being made. And, some loan structures that were intended to help people in unusual situations were open to wide abuse, on both sides.

But the CRA did not force anyone to make bad loans. That takes greed, and stupidity, and there's always enough of that going around to cause a crisis if you're not careful.
johnpalmer: (Default)
There's a meme going around that the Community Reinvestment Act caused the financial problems we're facing in the US.

It's false.

(edit: Hat tip to Sadly, No. Their own post is, shall we say, somewhat unkind towards the rightie bloggers spreading the meme, so I didn't use the direct link here.)


It is true that pushes to encourage home ownership helped things along a little bit. Time was when you couldn't buy a house without a large down payment, and that's changed, and that opened the door to more loans being made. And, some loan structures that were intended to help people in unusual situations were open to wide abuse, on both sides.

But the CRA did not force anyone to make bad loans. That takes greed, and stupidity, and there's always enough of that going around to cause a crisis if you're not careful.

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