I’ve run out of patience with tired memes and discredited claims by fools and partisan.

The rhetoric of those pushing nonsense on the public in an attempt to confuse rather than illuminate  — the phrase is “agnotology” –  only serves to aid the lobbyists working on behalf of the Banks and Investment houses to maintain the status quo.

All is well, nothing to see here, move along.

Well, its time to put up or shut up: I hereby challenge any of those who believe the CRA is at prime fault in the housing boom and collapse, and economic morass we are in to a debate. The question for debate: “Is the CRA significantly to blame for the credit crisis?”

A mutually agreed upon time and place, outcome determined by a fair jury, for any dollar amount between $10,000 up to $100,000 dollars (i.e., for more than just bragging rights).

The nonsense rhetoric blogged about has no cost to those pushing these discredited memes — but interferes in the societal attempts to understand how these problems arose and then how to fix them. Perhaps this will help clarify the issue by forcing those with partisan agendas to stand behind their claims.

Which of the many “CRA was a major factor” proponents have the courage of their conviction to step forward?


UPDATE 2:  June 29, 2009 1:15 pm

John Carney, you seem to be missing the point of this (apparently this is a theme with you) of what PUT UP OR SHUT UP means.

My goal in clarifying the actual causes of the crisis is SO THAT THEY CAN BE FIXED SO IT DOESN’T HAPPEN AGAIN.  It is not to support a now discredited ideological belief system or try to rescue the tainted legacy of Phil Gramm. It is not because I want to engage in polemicals or rhetorical debate — it is because this is important stuff.

Any well educated jackass can engage in abstract rhetorical debate. I wanted someone who lives and dies financially on the strength of their intellectual world view.

In other words, you must be THIS TALL to go on this ride. Rather than dismiss your inability to meet the requirements out of hand, let’s start this way:  I put my list of top 30 causes of the crisis here; Why don’t we start by you putting out your list of causes at Business Insider?


UPDATE:  June 29, 2009 11:41 am

John Carney has Tweeted a request for a financial backer– but what “put up or shut upactually means is put up your own money and have some skin in the game (like I will) or shut up.

As much as I would like to take a $100k from his backer, the phrase isn’t “raise a $100k from  some putz and debate me.”

If Carney can come up with something of comparable (non-monetary) value, we can discuss . . .


Category: Bailout Nation, Bailouts, Politics, Science

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

71 Responses to “$100,000 CRA Challenge”

  1. I am not confident any of these intellectual cowards will step up . . .

  2. Wes Schott says:

    …there is no debate, really

    from the first time i heard this bs it just eked of partisan talking points – the argument was specious from the get go

    anyone who looks into this matter seriously, even for 5 minutes, can see it is a totally bogus position – CRA is irrelevant to the housing and financial crisis

  3. Machiavelli999 says:

    Here is the problem Barry. You present in your book and in your blog a very nuanced position on why this crisis happened and how we can prevent it from happening again. You blame the government, but you blame it because you didn’t think it did enough to regulate the behavior of Wall Street greed.

    But there is a crowd out there and sadly I have to say that they make up a big portion of the commentators on this website who think the whole crisis can basically be linked to the CRA, Fannie, Freddie, Barney Frank & Chris Dodd and lets just throw in high taxes in there as well. I want to call this crowd the Rush Limbaugh-crowd or the Tea Party crowd. This crowd cares little for facts and evidence. Just the fact that government does anything to them means its bad. In my opinion, you don’t do nearly enough on calling this crowd on their BS since they so dominate the discussion in the comments section on this blog. But I am glad you are doing this.

  4. John Rosevear says:

    Alas, I bet nobody will take you up on it, Barry. It’s a talking point — the kind of thing one repeats over and over on Fox to stoke resentments among a partisan audience — not a serious argument. But I like your idea and I wish you luck…

  5. Mark Wolfinger says:

    They are not trying to convince anyone of their arguments – and the angrier it makes you, the more satisfied they are.

    This is equivalent to wanting to see schools ‘teach the controversy’ (evolution) when there is no controversy.


  6. jc says:

    NYT article about more bank fraud.I like the bit about GMAC misapplying mortgage payments to a loss mitigation fee and throwing the homeowner into default. Isn’t it time for these banksters to be arrested and charged with fraud?


  7. Mike in Nola says:

    The CRA-as-cause advocates may be stupid, but they are smart enough not to be against you.

  8. Marcus Aurelius says:

    People believe what they want to believe. Lots of power and money behind giving people what they want — even something as ethereal as a dishonest idea. Fact/truth/scientific observation/intellectually honest scrutiny has/have nothing to do with it. Nothing is harder than the head of a true believer (in anything).

    That said, if you really want to know what, — and perhaps, more importantly, who — caused these problems, the only logical way to do it is to follow the money (not debt or leveraged assets — cash and liquid assets). When you determine who are the primary cash/liquidity benefactors of all of this fuckery, you can start learning how they did it. (and hopefully making examples of them that will be remembered for more than a generation).

    We’re wasting time discussing the CRA only because that’s what some folks want to believe. Meanwhile, our collective money is being stolen out from under us.


  9. Pat Shuff says:

    The only thing certain is the awesome machinery that springs into action at the expression of a minority opinion.

  10. CNBC Sucks says:

    Ritholtz, give it up. You blog all day on behalf of “reality-, data-, and fact based” thinking and now you are putting up your own money to challenge people to a fact-based duel on CRA. Your frustration becomes more evident by the day. Your problem is that reality has a left-wing bias, and you live in a right-wing country. I find it fascinating that the more you grow in popularity arguing for regulation based on reasonable facts, the more Libertarians you attract who will bend all reality and history to fit the contours of their ideology, which by the way, does not exist in any other developed or developing nation, even Austria!

    Let me tell you something. I give up. I am glad I stayed a Republican. We are a right-wing nation – one bad election away from becoming a fascist state with the sheeple we have created through emo and indie – and the only way America can progress is to rebuild the left wing of the Republican party (and I am not talking about Tim Pawlenty). America desperately needs its enlightened, progressive elite to return. Right now, the situation is hopeless for all of the thoughtful regulation that we need to deal with the growing complexities of today’s world. You are completely surrounded. On the near left, you have the spineless who can only regulate if their legislation is so full of compromises that it is barely worth passing. On the far left, you have a handful of morons who will vote against their brethren’s legislation because it is compromised, even if the margin of error for passage is very small. On the far right, you have people who will say any legislation that doesn’t favor Exxon, the nuclear industry, Lockheed Martin, or Xe will somehow destroy America. Then, you have Libertarians, who will argue against regulating corporations because it will only somehow benefit corporations or the Bilderberg Bank of New York on Fifth Avenue. And in the middle, you have the American people like alfred e, who thinks carbon trading actually means people are trading carbon, http://www.ritholtz.com/blog/2009/06/the-great-american-bubble-machine-redux/#comment-187780

    Why do you blog for the general public, Ritholtz? Save your energy for your clients, make a shitload of money for yourself, run for the Senate as a Republican when you are ready. On that note, I will try to heed some of my own advice and go on my 300,000th retirement to mark the 300,000th page view of CNBC Sucks.

  11. RW says:

    An opinion in the form of “the shape of the earth is flat” is not accurately characterized as minority vs. majority but must rather be characterized as harmless vs. dangerous based on its policy implications; i.e., will it lead to ruin or mere laughter. Ignoring evidence and science is not a good policy and neither is any policy that accepts the “CRA did it” meme.

  12. Marcus Aurelius says:

    Pat Shuff:

    BR has repeatedly asked those advancing the minority (?) opinion to point to any evidence whatsoever that would back up their position(s). Now he is asking them to advance a logical basis for advancing those opinions in an adversarial contest (the only way conflicting ideas can be honestly evaluated, BTW), and he’s giving them financial incentive to lay their argument on the line. This is not awesome machinery bent on supporting group think. It’s sport.

  13. Craig in Ga says:

    The problem with the CRA argument as the cause of the crisis is its attempt to blame everything on Black American home buyers.

    If all new mortgages issued to Black Americans each year between 2001 and 2007 had gone into foreclosure in each of the following years, the resulting loss to our trilllion $ economy would probably have amounted to little more than a collective belch.

  14. Mannwich says:

    @Pat Shuff: What does this topic have to do with opinion? This is about facts. Relying too much on opinions have got this nation to where we are today – - in an ideologically funk that cares far too little about facts when presenting arguments. This CRA topic drives me insane. Glad you’re not giving up the fight, Barry, because I have already on wingnuttery topics like this. I can’t take it anymore.

  15. Hal says:

    it all depends on how you view the management of government. Local, state and federal. There is just too much of it, basically run by incompetants.

    They individually and collectively play to the masses to get votes–kind of the flavor of the week thing.

    There is just too much to say on this–but my favorite law is the seat belt law. Why have it–if the people are too dumb to protect themselves thats their problem. My take is if you are in an accident and are not wearing a seat belt you give up your right to litigate.
    I know this is nonsense but this is the type of thing we see in the bigger picture

    That and passing 1500 page controversial bills on a friday nite before a vacation week and most who we elected vote on it never having rad it which was written but interns. Go figure.


    BR: The seatbelt law is a perfect example of democratically elected people doing something for the benefit of all of society.

    There are costs and externalities to not wearing a seatbelt.

    1) In a side to side collision at speed, you may be thrown away from the controls — and therefore unable to avoid an even more catastrophic accident.

    2) Limited resources are consumed — police, fire, emergency vehicles — when an otherwise minor fender bender requires material and personnel to treat serious injuries that other wise would have been avoided. If you want to have access to taxpayer funded services, there are certain obligations that come with it.

    There are many more like this, but you get the idea. Your life and actions has consequences . . .

  16. EricTyson says:

    Would love to know how you possibly would have/find a “fair jury.”

    Also, if you’re serious about this, you should email your challenge to the best and the brightest who have taken the opposing point of view. Most of those folks are unlikely to frequent your blog.

  17. dead hobo says:

    1) As some posters above said, nobody will show up because facts are not the issue. The CRA issue has legs and can be used to influence the uninformed and easily led who need scapegoats to feel better about themselves. The CRA is not the objective, it’s the means.

    2) If it did go to a jury, the CRA folk would claim (scream from the rooftops) the jury was rigged unless they were able to stack it beforehand.

    3) Even if you won the jury, you would be ignored or vilified as a liberal dupe who uses stacked juries.

    Good luck. I’ll be rooting for you.

  18. dead hobo says:

    A long time ago I learned to never argue with drunks or idiots, unless it was for recreational value.

    Hope you’re having fun.

  19. VennData says:

    .might wanna do a side bet: “Will the Left-wing/Obama/ Anti-business Credit Card bill kill off the credit card industry?”

    Bank of America and First Data Form Next-Generation Payment Solutions Company


    Another winner! Barry Ritholtz putting his money where his data is. I tip my cap to the esteemed blogger / financer / raconteur.

  20. Wes Schott says:

    Eric@9:22 -

    …and do you have a mailing list of these best and brightest?

    Rush, Hannity, any others on the list.

    Mozillo and his cynical and egregious business plan to expand the sub-prime mortgage market by perverting the CRA and lobbying Fan and Fred to lower their standard for non-CRA loans…

  21. Pat Shuff says:

    I see strangling them in their sleep seems to work. Just trolling…

  22. laughingAllTheWay says:

    Who said it was a “major” factor? I’ve seen the argument being along the lines of “it’s irrelevant” vs “it’s not irrelevant.” NOT it’s the cause vs it’s not the cause.

    And, the causes which can be traced back to “guilty parties” seem to be ignored, not because CRA is in the mix, but because the politically and financially powerful are protected.

    I noticed the government is going after secondary sellers of Madoff funds even when those people lost their life savings. The sellers are the scapegoats for the SEC, even if they were duped too. The governments excuse is “they should have known.” I say the SEC SHOULD HAVE KNOWN! All they had to do was read their mail!

    Anyway, the point is, the guilty parties seem to all be getting away scot free, and in some cases (GS) just getting richer and more powerful.

  23. CaptiousNut says:

    As framed, this is a *strawmanish* type of sucker’s bet.

    But CRA, and its attendant politicization of the housing market, played a far bigger role than BR suggests. I don’t know precisely *how big* of a role CRA played in the subjectively defined *housing bubble* – nor does anyone else with certainty.

    [BR: Please make a list of who and what is to blame]

    But I know it’s foolish, and dangerous, for BR to take this tack of minimizing its significance. Why would anyone aid and abet agitprop?

    So they can fancy/market themselves *moderate*? *Above the fray*? *Objective*?

    You frame the argument differently, and I’ll lick you but good on a public stage – even though I half like you!

    Money is out of the question. One I don’t need 100k. Two, I value my anonymity more than that. And three, there are obvious *fairness* issues with a so-called jury.

    Since I won’t bet taxable fiat currency, BR you have your cheap *out*.

  24. markd says:

    Keep fighting the fight Barry, one side effect of the book is you get exposed to people who never visit.
    However I leave you with something my dad told me long ago:

    Just because a man is smart, educated or trained, good at his chosen career or work, doesn’t mean he can’t have his head completely up his ass on one or more subjects.

  25. Marcus Aurelius says:

    Karl Rove, is that you?

    “I’ll testify, but not under oath, and not on the record.”

    The framing of the argument is quite clear, this is a public stage, and everyone except BR is anonymous. You don’t even have to wager real money (that you don’t need — Oy!). Simply put the evidence you say you have forth to be judged on its merits.

    Where’s your evidence that CRA played a big role, a medium role, or ANY role?

    I see shuckin’ and jivin’.

  26. CaptiousNut says:

    IMNSHO, the housing bubble, whatever it was, whatever it is, was the result of a confluence of trends. It was a multi-variate event – not a crime committed in a vacuum by one from a discrete pool of suspects.

    In that *best fit* equation, I see CRA (and its wake) as statistically significant variables.

    And I assume you see CRA’s impact as insignificant or negligible.

    If you just want to debate the *It’s all CRA!* proponents, then that is, again, what I mean about your bet, as framed, being *strawmanish* and for *suckers*.

    If you want a *list* from me or more details on *who to blame* you’re going to have to throw down the gauntlet – as I’ m pretty busy at the moment homeschooling my kids and whatnot. There’ll be no more *feeling out* this potential opponent. You should know who I am as we’ve tangled before.



  27. Transor Z says:

    Without data, the CRA-as-culprit meme is circular, creating an issue ex nihilo. (“Ex nihilo” is Latin for “out of your ass.”)

    The herd-logic goes: “Important people/experts are talking about it therefore there must be something to it.” The target constituency is not people with critical thinkin’ skillz.

    You’re attacking this kind of meme on its own meme-ish terms, which is cool, by creating a rhetorical meme of your own: “Barry Ritholtz has an open wager to put up or shut up on CRA . . .”

  28. emmanuel117 says:

    I nominate the 10:08AM and 10:48 comments for Ballless Response of the Year. Note the evasions, the non-sequiturs, the epic goalpost-moving. Blind denialism at its finest.

  29. bonghiteric says:

    ..”homeshooling my kids and whatnot…”

    There’s just something about that phrase that made me laugh out loud.

  30. [...] Barry just placed a $100,000 bet saying someone could not convince a jury over him about this issue. God bless the internet. [...]

  31. Unsympathetic says:

    Captious Nut: Post your idea.

    I don’t think you’ve got any ideas – and furthermore are simply angry that Barry doesn’t parrot your (excuse me, Rush’s) Democrats-are-bad-mmkay stupidity. I even bothered to go to your blog. I demand those 90 seconds of my life back. And please, stop attempting to find an analogy to best-fit curves – the r^2 of that so-called “best fit” wouldn’t crack 0.1.

    Got an idea? Post it, I’ll be happy to eviscerate it.

  32. mknowles says:

    BR: If you’re successful with this challenge, can you take on the global warming deniers next?

  33. [...] John Carney found a backer for a public debate with Barry Ritholtz over whether the Community Reinvestment Act was significantly to blame for the credit crisis? Barry [...]

  34. [...] by Charles II on June 29, 2009 Barry Ritholtz has offered up to $100,000 to anyone who can prove, to the satisfaction of a fair debate jury, that the [...]

  35. farmera1 says:

    My question is how did we as a great country get to this point. The reality is what I say it is crowd, seems to be in control. The WMDs, the Iraq was behind 911, the science is for pin heads, this started when the uber rich, started monopolizing the media IMHO. The crowd that gave us the Simpson’s, the faux news, the support our war or you’re a trader crowd is in control, and you say how can they be in control since their numbers are so few, IMHO it probably takes about 20% of a society to foment civil war, or destroy a culture.

    Contrary to many I see the economic problems mainly as a problem with society. The inability to deal with facts, making your own reality is leading us off the cliff. I think this whole society is in trouble, unless we get drastic changes, we are all going over the cliff. And the changes needed are much more basic than just economic changes. Our in ability to enact meaningful regulatory reforms seems to be just another symptom of a society in serious trouble.

    Here’s one prediction, if we don’t do something about global warming and the crisis does develop as predicted by science, the patisans (the 20%)will be shouting from the roof tops, it is Obama’s fault because he didn’t make them deal with the problem. How about health care, wars, and the rest of the list of goes on and on. It only takes about 20% and that 20% is very active, rich and they control a large part of the media.

    Things don’t look good.

  36. [...] $100,000 CRA Challenge goes out.  (Big Picture, John [...]

  37. [...] Act caused the entire housing industry to melt down into unending crisis. Here’s Ritholtz, serving it up: I’ve run out of patience with tired memes and discredited claims by fools and [...]

  38. [...] Act caused the entire housing industry to melt down into unending crisis. Here’s Ritholtz, serving it up: I’ve run out of patience with tired memes and discredited claims by fools and [...]

  39. Dennis says:

    Business Bloggers To Debate CRA Role In Housing Crisis For $100K

    Huffington Post
    Hey, everybody! Want to make a quick and dirty $100000? All you have to do is beat Barry Ritholtz, business journalist and author of Bailout Nation in a

    Blame the Community Reinvestment Act? Win $100000!
    Forbes Barry Ritholtz – ‎2 hours ago‎

    Forbes editors let you see what they are reading elsewhere on the web, and give their perspective on it 24x7x365. +Share By Barry Ritholtz – June 29th,

    A Carney-Ritholtz CRA debate?
    Reuters Blogs Felix Salmon – ‎4 hours ago‎

    Has John Carney found a backer for a public debate with Barry Ritholtz over whether the Community Reinvestment Act was significantly to blame for the credit

    The $100000 blogger bet on the housing bubble

    Daily Finance James Cullen – ‎30 minutes ago‎

    Words have been flying on the politically charged topic of the role the Community Re-investment Act, a law passed in the 1970s to encourage bank lending to

    More thoughts on CRA and the crisis
    The Daily Deal (subscription) – ‎2 hours ago‎

    Last week, Clusterstock’s John Carney brought the debate about what role the Community Reinvestment Act played in the credit crisis back to the fore

    It’s Time to Put Up or Shut Up for People Who Blame the CRA for
    The Washington Independent Mary Kane
    Here’s a huge pat on the back and a show of support for Barry Ritholtz, who truly has had it with those who keep clinging to

  40. Eric says:

    Barry, et al;
    I haven’t been here for awhile and have missed much of the CRA debate. What I am looking for is some data on CRA foreclosures. Specifically by year, and Vs 5 % and 10 % conforming conventional loans. Anybody got a chart for that??
    There is one good aspect to the CRA loans which I think should be carried over to FHA, VA and Freddy/Fanny 10% or less down loans. CRA loan applications at my shop required attedance at a First Time Homebuyer’s lecture and they got material to take with them too, about dealing with the issues that spring up with home ownership.

  41. [...] widely discredited belief that the Community Reinvestment Act caused the housing crisis. Ritholtz writes at The Big Picture that he’s offering a debate challenge, with a prize of up to $100,000 to be [...]

  42. nemo says:

    Hey, if Jay Carney has confidence in his arguments, he should be happy to BORROW the 100 grand to debate Barry.

    Carney and his backer (or more precisely, his banker) should demonstrate in writing before the debate that Carney is taking the risk, not his banker.

    Besides, Barry said “for any amount between $10,000 and $100,000.” Surely Jay Carney can come up with at least $10K of his own scratch.

  43. Unsympathetic says:

    Carney, what is your position?

    I don’t care that you’re taking Barry up on his offer – good for you. WHAT IS YOUR FLIPPING POINT?

    This isn’t a Republican primary – unfortunately, facts actually do matter. Want to prove the CRA is bad? Let’s see those thoughts. To quote the Family Guy’s Stewie, I don’t think you’ve got the grapes.

  44. nemo says:

    Whoops, that’s John Carney, not Jay. Carney is a financial blogger, not an out-of-work Starbucks barista, but he can’t lay his hands on $10,000 of his own money?

  45. CaptiousNut says:

    Why would Carney post his arguments up front?

    If he does, he’s not that bright. He should save them for the smack-down.

    (BTW, it looks like he’s already written much on the subject.)

  46. Transor Z says:

    And I suppose Carney will win by presenting . . .

    “Surprise witnesses, each more surprising than the last. The judge won’t know what hit him. ”
    -Lionel Hutz, Attorney from “The Simpsons”

    (RIP Phil Hartman)

  47. Westgate Golf says:

    I think this is the funniest part of John’s post:

    “We’ll come to some reasonable arrangement about how to divide the return on the investment. I’ll take something for my sweat equity (which will also provide the sponsor with assurance that I’m properly financially incentivized to win), while the sponsor will take most of the upside.”

    Let me get this straight: John Carney wants a guaranteed dollar amount for himself and his “sponsor” to take 100% of the risk. He’s not even willing to invest his own time in the effort without a guaranteed payday.

    Debate over – Barry wins on account of his point is proven already. Like the CRA, John wants zero accountability for his own efforts.

  48. sst3d says:

    hmmm. I didn’t realize John Carney was such a little bitch.

  49. CaptiousNut says:

    I think it’d be wrong, and more than ironic, to *red-line* a potential debater such as Carney based upon *means*.

    And, BR, don’t you make your livelihood investing/trading OPM???

  50. Andrew Krone says:

    Finding an agreed upon “fair jury” might be the most difficult part to the proposition.

  51. Andrew Krone says:

    Oh, and John Carney is an idiot.

  52. Kewalo says:

    I don’t think most people here realize how the CRA meme fits into the RW philosophy. Believe me with many of them it is the minorities (who never work) and liberals (who encourage them not to work) who are to blame for the mess the country is in. And no, I’m not kidding. Occasionally I go to a political message board and it is truely astounding how ignorant people are. And I don’t know how we can expect more out of them when they just love Hannity, Rush and Beck, all college dropouts, and believe whatever these idiots say. Honest to God, these are people that will write it’s stealing from the rich if the tax cuts are allowed to expire.

    And really, why should we expect anything different when they’ve been led by people that believe in the “invisible” hand that magically kept the economy in line and there are still people that believe that.

    I hope that someone takes Barry up on his bet, but I doubt anyone will. And even if someone does it won’t get to the idiots that have swallowed it already. It just fits in too closely with their world view.

    But good luck with this. I’ll look forward to reading it. And since I’m brand new posting here, just want to say thanks for keeping this issue clear enough for someone like me to understand it.

  53. mickeyc says:

    This seems like a manufactured feud to drive traffic. You would have to have an IQ lower than a rock to actually think you can prove a social argument so the $100k bet is grandstanding.

    Despite the cheering squad backing your view point your argument is also extremely suspect. The CRA is clearly not THE thing that caused the housing boom. However, in my part of the country (Southern California) , 79% of loans in the subprime category went to minority borrowers. I read for years bankers in the LA Times etc saying how proud they were to be complying with the CRA by making these loans. So the majority of people defaulting on subprime in SoCal are minorities lent to by bankers using CRA as an excuse.

    How does this not have any relevance?


    BR: 3 questions for you:

    1) What is your data source? (for “79% of loans in the subprime category went to minority borrowers”)

    2) Were the loans made by CRA covered banks, or non-bank mortgage originators?

    3) Did these mortgages default in greater numbers than the national and/or local median?

  54. Groty says:

    You tell the CRA crowd to defend their honor and back up their views with their bank account or STFU, huh? Funny stuff. It must be very crowded when both you and your ego occupy the same room.

    The challenge strikes me as kind of a 21st century duel.

    I hope you research exactly where in Weehauken Aaron Burr shot and killed Alexander Hamilton in their duel and you hold the debate there. CNBC will probably jump all over it. Or better yet, if Carney can’t come up with the dough, why don’t you challenge him to a duel in the Octagon. Dana White and the Ultimate Fighting Championship can cover it on pay per view.

  55. Simon says:

    If I had $100k to make such a bet with I wouldn’t do it unless I knew I could win. Even with my small ego it would be tempting to try if I were comfortable in the spot light. After I’d won of course my ego would expand to unlimited proportions until my wife told me I was an idiot and I’d better put the rubbish out or else.

    Knowing all that I’d still be tempted if I thought there was a really good reason. I think the ability to sway a very important debate towards the a fact based argument is surely ultimately very worthwhile. After all America would never have got to the Moon let alone Mars if it was still generally believed that all the planets and the Sun revolved around the earth. There you go Barry I’m comparing you to Galileo.

  56. CaptiousNut says:

    Its funny how the talking points went from *subprime is contained*, *alright, maybe it’s not contained”, and then back to *subprime has nothing to do with the larger market*!

    BR, the market is linked, top-to-bottom; it always was and always will be.

    When the government inflates the value of $50,000 shacks to say $100,000 throughout an entire neighborhood…it has ramifications far beyond the notional value of the individual subprime mortgages.

    Many other homeowners sold into the higher market and traded up.

    Many took out HELOCs to buy a speculative beach condo, a Hummer, or the house next door.

    Many no doubt took notice of their paper wealth and took to unsustainable lifestyles on credit cards and whatnot.

    The *many* people I just described DIDN’T EVEN take out a subprime loan. I could trot out scores of personal examples who did just what I described; as could most of us in touch with the lumpen masses. Consider my landlord who was living in the projects 12 years ago. Today, he’s got three sports cars, four homes, and $4 million of mortgage debt (on $2 million worth of real estate), and 200k in credit card debt. Do I even need to spell out how he managed that? Tomorrow, on his way back to the projects he’ll be leaving behind red ink for auto leasers, credit card companies, prime AND subprime lenders, and taxpayers.

    You keep asking opponents for *data*? Where’s your data on the collateral damage inflicted by those whose names don’t show up on subprime mortgage applications?

    Missing *what is unseen* is THE BADGE of economic illiteracy.

  57. Kimble says:

    This is just stupid for a whole bunch of reasons:

    1. You will only get wealthy people taking you up on the offer (especially now that you have said it has to be the persons own money), so this cuts out most of the population.

    2. The “fair” jury will be next to impossible to find.

    3. Even if you find a fair jury, the only takers you will get for the wager will be people who are supremely confident in their case. This excludes the people who think you are wrong, but are not confident that it can be proven conclusively one way or another. This makes the wager nothing but a coin flip.

    4. The fact that you make it an even money bet proves that you think it IS a coin flip. If you were that confident in YOUR case you would offer odds.

    5. The winning side of the debate wouldn’t necesarily be the correct one.

    Think of it like this:
    I reckon I am better than you at poker, but I dont think my edge is large enough to let you pick the stakes. You could make the stakes high enough that my risk of ruin would be too great to take the bet. Your risk of ruin would be minimal because you are a rich capitalist.

    I dont know anything about the CRA debate so wont argue that, but this challenge is just stupid.

  58. Engineer. says:

    Steve Sailer has already completely dismantled your entire argument. It’s also quite clear he’s done far more research on this issue than you (or any other blogger).


    BR: Then he should have no problem assembling some data to prove his case, n’est pas?

    Selective perceptive isn’t too expensive in politics, but its deadly in investing.

  59. EAR says:

    “As scarce as truth is, the supply has always been in excess of the demand” – Josh Billings

  60. EAR says:

    Why does the right wing think that they’re right on this when they’ve been so wrong with everything else?
    Look around you, the evidence of their “wrongness” is everywhere.

    They have no choice but to embrace alternate reality.

  61. AMac says:

    As a follow-up to “Engineer’s” comment and BR’s remark (June 30th, 2009 at 3:34 am), Sailer has assembled links to his posts on this subject Here . Unlike typical pundits, Sailer has worked to discover mortgage-related data and presented quantitative analyses of them, in support of his contentions.

    Narrowly defined, BR’s question of whether a legislative act of 1977 is significantly to blame for the credit crisis has to be answered in the negative. The more interesting and relevant issue is whether the CRA was an early instance of a prominent pattern of bipartisan legislative and regulatory initiatives that contributed to the financial crisis we are experiencing. In my opinion, Sailer’s analysis speaks to this point.

  62. Ryan Chittum says:

    Felix Salmon takes John Carney of Clusterstock to task for latching on to the right-wing effort to blame the housing bubble and financial crisis (or at least a good part of it) on the Community Reinvestment Act, a law passed in the year of my birth thirty-two years ago.

    I thought we had dispensed with this discredited argument, but Carney brings it up, so here’s his smackdown.

    First, if you must, read Carney’s posts here, here, here, and here.

    Salmon’s posts are here and here. He says at one point:

    The fact is that the CRA did not encourage banks to extend the kind of toxic loans which ended up being such an important component of the financial crisis. Indeed, most of those loans weren’t made by banks at all — they were made by unregulated subprime lenders who had no CRA responsibilities whatsoever.

    Salmon does a good enough job of demolishing Carney’s argument, but let’s see how deep we can bury it.

    Barry Ritholtz of The Big Picture goes off on Carney here with a “CRA Thought Experiment”:

    In reality, the precise opposite of what a CRA-induced collapse should have looked like is what occurred. The 345 mortgage brokers that imploded were non-banks, not covered by the CRA legislation. The vast majority of CRA covered banks are actually healthy.

    The biggest foreclosure areas aren’t Harlem or Chicago’s South side or DC slums or inner city Philly; Rather, it has been non-CRA regions — the Sand States — such as southern California, Las Vegas, Arizona, and South Florida. The closest thing to an inner city foreclosure story is Detroit – and maybe the bankruptcy of GM and Chrysler actually had something to do with that.

    Ritholtz, fairly, asks for one bit of evidence that CRA is responsible in any significant way for the bubble and resulting crisis.

    Daniel Gross took a whack at the CRA speciousness back in October over at Slate.

    The Community Reinvestment Act applies to depository banks. But many of the institutions that spurred the massive growth of the subprime market weren’t regulated banks. They were outfits such as Argent and American Home Mortgage, which were generally not regulated by the Federal Reserve or other entities that monitored compliance with CRA. These institutions worked hand in glove with Bear Stearns and Lehman Brothers, entities to which the CRA likewise didn’t apply. There’s much more. As Barry Ritholtz notes in this fine rant, the CRA didn’t force mortgage companies to offer loans for no money down, or to throw underwriting standards out the window, or to encourage mortgage brokers to aggressively seek out new markets. Nor did the CRA force the credit-rating agencies to slap high-grade ratings on packages of subprime debt.

    And it must be said:

    These arguments are generally made by people who read the editorial page of the Wall Street Journal and ignore the rest of the paper—economic know-nothings whose opinions are informed mostly by ideology and, occasionally, by prejudice.

    Here’s Federal Reserve Governor Elizabeth A. Duke talking to the American Bankers Association in February, noting that a tiny minority of loans were under the CRA:

    I would like to dispel the notion that these problems were caused in any way by Community Reinvestment Act (CRA) lending. The CRA is designed to promote lending in low- to moderate-income areas; it is not designed to encourage high-risk lending or poor underwriting. Our analysis of the data finds no evidence, in fact, that CRA lending is in any way responsible for the current crisis…. In fact, the analysis found that only 6 percent of all higher-priced loans were made by CRA-covered lenders to borrowers and neighborhoods targeted by the CRA. This very small share makes it hard to imagine how CRA could have caused, or even contributed in a meaningful way, to the current crisis. Further support for this conclusion comes from our finding that serious delinquency rates for subprime loans are high in all neighborhood-income categories, not only those in lower-income areas, as might be thought if the CRA were a contributing force to the subprime crisis.

    One problem with the CRA-is-bad thesis is that the act was passed in 1977. Carney and other anti-CRAers say it wasn’t really enforced until Clinton refined it in 1995. But CRA enforcement was gutted by George W. Bush during the 2000’s—aka “the bubble.” Paul Krugman quotes from the administration’s new white paper on financial reform:

    Some have attempted to blame the subprime meltdown and financial crisis on the CRA and have argued that the CRA must be weakened in order to restore financial stability. These claims and arguments are without any logical or evidentiary basis. It is not tenable that the CRA could suddenly have caused an explosion in bad subprime loans more than 25 years after its enactment. In fact, enforcement of CRA was weakened during the boom and the worst abuses were made by firms not covered by CRA.

    Aaron Pressman of BusinessWeek had a good roundup back in September of evidence against a CRA role, and he mentioned the Bush-era laxity (emphasis mine):

    Finally, keep in mind that the Bush administration has been weakening CRA enforcement and the law’s reach since the day it took office. The CRA was at its strongest in the 1990s, under the Clinton administration, a period when subprime loans performed quite well. It was only after the Bush administration cut back on CRA enforcement that problems arose, a timing issue which should stop those blaming the law dead in their tracks. The Federal Reserve, too, did nothing but encourage the wild west of lending in recent years. It wasn’t until the middle of 2007 that the Fed decided it was time to crack down on abusive pratices in the subprime lending market. Oops.

    Pressman points to a post by Robert Gordon in The American Prospect back in April 2008 noting that even the banks (!) don’t have the chutzpah to blame CRA:

    It’s telling that, amid all the recent recriminations, even lenders have not fingered CRA. That’s because CRA didn’t bring about the reckless lending at the heart of the crisis. Just as sub-prime lending was exploding, CRA was losing force and relevance. And the worst offenders, the independent mortgage companies, were never subject to CRA — or any federal regulator. Law didn’t make them lend. The profit motive did.

    The Orange County Register’s Ronald Campbell had an illuminating story in November looking at the CRA question. You don’t (alas) see many news stories point-blank tell you something is BS, especially when they also call out their own editorial page:

    From the editorial pages of The Wall Street Journal to talk shows to the op-ed page of The Register, people are charging that the Community Reinvestment Act of 1977 forced banks to make bad loans, leading to financial Armageddon.

    There’s just one problem: It isn’t true.

    Awesome. In addition to a load of statistics that call the lie, Campbell reports this:

    The criticisms of the reinvestment act don’t make sense to Glenn Hayes. He runs Neighborhood Housing Services of Orange County, which works with banks to provide CRA loans to first-time homebuyers. In its 14-year history, the nonprofit has helped 1,200 families buy their first homes. Score so far: No foreclosures and a delinquency rate under 1 percent.

    “It is subprime that’s really causing it,” Hayes said of the mortgage crisis. “But CRA did not force anyone to do subprime.”

    And the coup de grace is the quote from the American Bankers Association:

    Bob Davis, executive vice president of the American Bankers Association, which lobbies Congress to streamline community reinvestment rules, said “it just isn’t credible” to blame the law CRA for the crisis.

    “Institutions that are subject to CRA – that is, banks and savings associations – were largely not involved in subprime lending,” Davis said. “The bulk of the loans came through a channel that was not subject to CRA.”

    Last year, the law firm Traiger & Hinckley LLP found that (PDF) CRA banks were 58 percent less likely to issue high-cost loans (read: the loose-termed subprime ones Carney’s blaming on them) than non-CRA lenders and when they did their interest rates were a whopping 74 basis points (0.74 percent) below those of non-CRA lenders.

    And another Federal Reserve Governor, this time Randall S. Kroszner, who gave this speech in December:

    …we found essentially no difference in the performance of subprime loans in Zip codes that were just below or just above the income threshold for the CRA.9 The results of this analysis are not consistent with the contention that the CRA is at the root of the subprime crisis, because delinquency rates for subprime and alt-A loans in neighborhoods just below the CRA-eligibility threshold are very similar to delinquency rates on loans just above the threshold, hence not the subject of CRA lending…

    To gain further insight into the potential relationship between the CRA and the subprime crisis, we also compared the recent performance of subprime loans with mortgages originated and held in portfolio under the affordable lending programs operated by NeighborWorks America (NWA). As a member of the board of directors of the NWA, I am quite familiar with its lending activities. The NWA has partnered with many CRA-covered banking institutions to originate and hold mortgages made predominantly to lower-income borrowers and neighborhoods. So, to the extent that such loans are representative of CRA-lending programs in general, the performance of these loans is helpful in understanding the relationship between the CRA and the subprime crisis. We found that loans originated under the NWA program had a lower delinquency rate than subprime loans. Furthermore, the loans in the NWA affordable lending portfolio had a lower rate of foreclosure than prime loans. The result that the loans in the NWA portfolio performed better than subprime loans again casts doubt on the contention that the CRA has been a significant contributor to the subprime crisis.

    How about more from the Fed? This time from the Minneapolis bank:

    Two basic points emerge from our analysis of the available data. First, only a small portion of subprime mortgage originations is related to the CRA. Second, CRA-related loans appear to perform comparably to other types of subprime loans. Taken together, the available evidence seems to run counter to the contention that the CRA contributed in any substantive way to the current mortgage crisis.

    Here’s Ellen Seidman, former head of the Office of Thrift Supervision, who wrote against the CRA haters here, calling it “patent nonsense.”

    While many of us warned against bad subprime lending before the turn of the millennium, the massive breakdown of underwriting and extension of risky products far down the income scale-without bothering to even check on income-was primarily a post-2003 phenomenon. To blame a statute enacted in 1977 for something that happened 25 years later takes a fair amount of chutzpah.

    Also see this good McClatchy story we’ve linked before.


  63. AMac says:

    Ryan Chittum –

    Excellent summary of the state of the CRA arguments, and thanks for including so many links. The data in the Traiger and Hinckley PDF is especially interesting.

  64. choiway says:

    The most fascinating aspect of this continued argument is the conspiracy theory like fervor for ignoring the facts exhibited by the CRA-cum-meltdown camp. Cognitively, it seems similar to those who continue to hang on to the belief that 9/11 was orchestrated by the US Government because the reality of our government not being a well coordinated overseer of our security as depicted by Hollywood is difficult to accept. Is it really that difficult to accept the reality that banks reacted to the subprime miracle that mushroomed around them without having a hand in it? As someone who’s worked at two of the ten largest banks, I have no problem accepting it.

  65. mickeyc says:


    To answer your questions:

    1) Source: Federal Home Mortgage Disclosure Act Database. Info here http://slycapital.com/2009/04/21/ethnic-makeup-of-subprime/

    2) Both non bank and bank originators. The extensive cross pollination of the two due to extensive purchase of non bank origination by CRA banks makes this point something of a blind alley.

    3) Minority borrowers essentially WERE subprime in SoCal (79%) so it becomes a question of whether subprime defaulted to a greater extent than other loan types. This has been headline news since mid 2007. There is no breakdown on default rates by ethnicity that I know of and I doubt any major company or government agency would take the political risk of keeping records like that.

    Demonizing minorities and blaming CRA for the RE collapse is stupid. Not seeing it as part of the puzzle makes no sense either though.

  66. [...] this debate assume such evidence exists).  However, I’m skeptical and so is Barry Ritholtz, so much so that he’s willing to put up a significant amount of money to debate the issue [...]

  67. [...] Heritage College Dictionary) that means “the study of culturally constructed ignorance”—and challenged him to a debate with $100,000 going to the winner. Carney is currently trying the raise the $100,000 stake, and Felix Salmon has recruited the FT’s [...]

  68. [...] I am ecstatic at this little experiment Barry Ritholtz is proposing: He will debate anyone on the topic, and bet $100,000 of his own money on it.  Let’s see how [...]

  69. [...] offered to debate for a cash prize of up to $100,000 but Carney demurred for financial reasons.  (The Big Picture) and [...]

  70. [...] Act (CRA) had just about nothing to do with the economic meltdown. Finally, he got pissed and issued a challenge: Well, its time to put up or shut up: I hereby challenge any of those who believe the CRA is at [...]

  71. lane4411 says:


    Suggestion go directly @ the following:



    *Phil Gramm;

    *Congressman who have stated falsely that CRA, was the direct cause of the crisis.

    Challenge these people directly on youtube, twitter, etc

    Would appreciate a special on Phil Gramm or a book, as stated earlier this guy is dirty – from the S&L debacle through today. Phil should get jail time!!!