Saturday, June 12, 2010

The "CRA" Meme Is Just Wrong

Barry's demonstrated that there are a number of numbskulls out there.

He's at it again, this time quoting Joe Nocera:

“Indeed, conservatives tend to view the affordable housing goals imposed on Fannie and Freddie as the central reason for the credit crisis. “In order to increase homeownership, Fannie and Freddie were required to decrease their standards,” said Peter Wallison, a fellow at the American Enterprise Institute and perhaps the country’s leading critic of the G.S.E.’s...

But Fannie and Freddie’s affordable housing goals — which the G.S.E.’s easily gamed — were not the main reason. Rather, it was the rise of the subprime lenders — and their ability to get even their worst loans securitized by Wall Street —that was the main culprit. Fannie and Freddie lowered their standards mostly because they were losing market share to the subprime originators.”...

Of course, when Fan/Fred, the proverbial 800-lb. canary, jumped in things got much worse a lot faster.

But let's be clear: something like SEVENTY FIVE PERCENT of the crap loans were originated by brokers, not Banks. And the brokers were selling their crap loans to Lehman, Bear, and Goldie (etc.)

So let's not be confused. WallStreet's vampires--some dead, some not--were players. They're perfectly happy to have AEI and Cato shilling for them.

You should be smarter than to buy what's being sold.


Jim said...

Hey! We sort of agree here. I work for a major US bank. We NEVER lowered our standards to make our CRA goals. We just tried harder to find the qualified people.

Dad29 said...

FWIW, "brokers" covers a lot of ground.

There's a local "bank" (used to be an S&L) which had ran a brokerage biz--so one could say that the broker was actually the bank in a different skin.

But the actual Bank-lenders did not drop standards except as required by the GSEs.