TAKE ACTION: Tell Jeff Jacoby a Law Passed 31 Years Ago Can't Cause Financial Collapse Today
Boston Globe reporter Jeff Jacoby is yet another conservative columnist slinging the false claim that the Community Reinvestment Act (CRA), which was passed in 1977, is the cause of the financial meltdown. It seems time is no barrier to conservatives trying to escape responsibility for wreckless lending practices by Wall Street investment banks and the lax Bush administration oversight that let it flourish. As Matt Yglesias writes, no respectable business reporter buys this theory that the CRA "leapt through a wormhole and caused the subprime meltdown thirty years" after it passed.
As Think Progress so clearly laid it out:
- CRA Only Applies To Federally Insured Banks And Thrifts: CRA did not apply to independent mortgage companies, which were responsible for "half of sub-prime loans." Only about "one in four sub-prime loans were made by the institutions fully governed by CRA."
- CRA Institutions Engaged In Less Dangerous Lending: As the president of the San Francisco Federal Reserve points out, "independent mortgage companies, which are not covered by the CRA, made high-priced loans at more than twice the rate of the banks and thrifts."
- CRA Does Not Encourage Or Condone Bad Lending: According to Ellen Seidman, Director of the U.S Treasury Department’s Office of Thrift Supervision from 1997 to 2001, CRA-covered institutions were warned "that badly underwritten subprime products that ignored consumer protects were not acceptable. Lenders not subject to CRA did not receive similar warnings."
>>Tell Jeff Jacoby to Get His Head out of that Wormhole