but....you can take your last statement and apply it to the right wing myth that CRA's caused the housing bubble to burst.<quoted text>Your article omits to mention that a stricter version of the 1977 CRA was enacted by Bill Clinton in 1995. This renewed and toughened CRA gave federal regulators the authority to severely curtail the activities of a bank if the bank fails to follow this act. The next tightening step occurred in 1999, when Bill Clinton signed into law the Gramm-Leach-Bliley Act which further expanded the reach of the CRA. From 1995 to 2004 it is a mere 9 years. A large majority of the subprime loans was granted under APR mortgage terms. That is, a very low interest rate is offered for the first five years of the loan. After these five years, the interest rate is no longer fixed and rises sharply. The inital low interest rate was necessary for the banks to sell enough subprime loans and not get criminalized under the CRA. The house owners usually get in trouble when the interest rate rises and they can no longer afford the loan. Therefore, there was a five-year lag after the introduction of the tightened CRA before the first problems started to appear. Furthermore, new loans were granted over many years, and the remaining four years after subtracting the lag do not appear that long anymore. When the tightened 1995 CRA by Bill Clinton is considered, the notion that the CRA is the root cause of the subprime mortgage crisis no longer appears silly.
Next, the article claims
... that 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations.
Please consider the exact wording. No comprehensive federal supervision. Does this mean that the CRA law still applies and is just not supervised and enforced? What about the banks and thrifts which are not subject to routine supervision or examinations? Do they act unlawfully just because of a lack of supervision? Is this the path recommended by the author? First, the text of the CRA applies to all regulated financial institutions - these are banks, insurance companies and their subsidiaries.
Second, please note that no real statistics are provided.
i'm not taking your 'explanation' as solid reasoning without something to back it up.
so i guess we're done.