Bachmann’s right – It’s The CRA, Stupid!

October 13, 2011 17:22

“If you look at the problem with the economic meltdown, you can trace it right back to the federal government,” she said. “It was the federal government that pushed the subprime loans. It was the federal government that pushed the Community Reinvestment Act.”

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To their chagrin, the media elite moderating the latest GOP presidential debate got schooled in the real causes of the financial crisis by the line-up of candidates.

One of the worst rules on the books, the CRA fed the subprime bubble by requiring banks to underwrite a share of their loans in high-risk, unprofitable areas.

Newt Gingrich backed her up. Even media darling Ron Paul chimed in that the CRA led to “malinvestment” among banks.

Prudent underwriting was deemed racist and banks were judged on how “flexible” they could be in qualifying “nontraditional”credit cases. The more they bent their old rules and the more lower-income minority borrowers they rubberstamped for loans, the better they did on their all-important CRA examinations.

In the run-up to the crisis, boosting minority home ownership became the goal of the U.S. government. And incredibly, lowering mortgage-underwriting standards to achieve that goal became government policy.

“We had lending standards lowered for the first time in American history,” Bachmann duly noted. “The fault goes back to the federal government.”


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