John Carney’s Bizarre Crusade Against the CRA
By Barry Ritholtz - June 25th, 2009, 11:00PM
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Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
June 25th, 2009 at 11:19 pm
CRA, Fannie, Freddie, poor people, immigrants, minorities, and the weak and frail were all responsible for the mess we’re in. Did I miss anything? That’s the story on the right and they’re sticking to it no matter how insane they all sound these days.
June 25th, 2009 at 11:34 pm
Wow! Up late tonight, eh?
Divide and conquer.
June 25th, 2009 at 11:59 pm
Would this count as an “ad hominem” attack? Referring to someone’s “crusade” as ‘bizarre.’? I’ve read Carney’s pieces and he seems like someone who had a certain viewpoint about the CRA and then after some amount of time he has changed his opinion, with some amount of reasoning. After reading his pieces, I wouldn’t call his logic strange or bizarre or out in “left field.”
I happen to believe it was just a small piece of a more macro problem….
But, hey, we’re all entitled to our own opinions and Carney seems to have thought this one through a bit.
June 26th, 2009 at 12:22 am
Here’s my opinion, I’m beginning to think that you have a CRA fettish Ritholtz!
June 26th, 2009 at 12:30 am
I guess what is missing as evidence is the government brochure showing the banking industry and rating agencies how to knowingly slice and dice known to be sub- prime mortgages and pass them off as risk free.
So if we’re going to apportion blame according to who had the most to gain:
The homebuyer was given a chance and wound up with less and a ruined credit rating. Now a credit slave for the rest of his/her life.
The mortgage agent/local agency that slaved away for a few paltry thousand.
The TBTF banks that turned CRAs into billions of profits with effectively no reserves and no skin in the game.
Governments that gained trillions on inflated real estate values.
Perhaps Carney is simply upset he wasn’t a bigger player. Or he’s setting the govt up for the next fleecing. Or he forgot to take his meds.
June 26th, 2009 at 12:32 am
Manwich – you forgot ACORN
June 26th, 2009 at 1:30 am
Barry, I find myself both agreeing and disagreeing with John.
I disagree that CRA was a significant financial component in the subprime disaster.
I do believe that the concept of bending over backwards to make a loan work has at least some of its philosophical roots in programs like the CRA. I strongly oppose government mandates that force companies to do business with certain companies or individuals, not because they are the cheapest or the best at what they do, but because the proprietor or individual is a minority.
This is different from issues like voting rights, where the government has to make sure that every citizen is represented. In this case, legislation and Constitutional amendments aim to guarantee certain rights to all citizens.
However, with programs like the CRA, we are in essence changing the lending rules for a certain class of people. And once bankers and mortgage brokers got the idea into their heads that these lending standards could bend, I imagine it took fractions of a second for the more aggressive of the bunch to figure out that such flexibility could be applied to a whole new market. Thus, subprime lending sees a not-insignificant uptick in the late 1990s, years before Greenspan blessed these folks with 1% interest rates and accelerated deregulation.
There’s no way to prove this link, as it is not dollars-and-cents, but an intellectual development over many years.
I really need to stop posting when I’m inebriated.
June 26th, 2009 at 1:34 am
Also, if you really disagree that handouts are a disease that infects everyone eventually, look at our world today, and tell me that even the highest and mightiest among us haven’t succumbed to this plague.
It really is that simple: bend the rules for a few, regarless of intentions, and eventually, the rules fly out the window.
June 26th, 2009 at 2:05 am
Gosh I feel like a troublemaker now (inside joke) but Barry I agree with Carney. He changed his mind after reviewing all the evidence and it takes a real man to admit they were wrong. Keep in mind not only the CRA’s but the fact that bj bill let Glass-Steagall go and the Democrats also brought back Usury. Like Durbin says “Frankly the banks own the place”
Usury used to be illegal in the United States but it was “decriminalized” in 1980–the dawn of financial deregulation. A Democratic president and Congress repealed all interest-rate controls and the federal law prohibiting usury. Thirty years later, American society is permeated with usurious practices–credit cards charging 30 percent and higher, subprime mortgages and other forms of predatory lending, the notorious “payday” loans that charge desperate working people an effective interest rate of 500 percent or more. Businesses, especially smaller firms, are also prey to usury in less direct ways.
http://www.thenation.com/doc/20090622/greider
Dick Durbin could not conceal the bitter aftertaste. He told a hometown radio interviewer: “Hard to believe in a time when we’re facing a banking crisis that many of the banks created–they are still the most powerful lobby on Capitol Hill. And frankly, they own the place.” Durbin’s disappointment may have included the former Illinois senator whom he had championed for president. Barack Obama took a walk on reform. Last year as a candidate, Obama declined to support the bankruptcy provision for the financial-bailout legislation, but he promised reform groups he would support it if elected.
Needing credit to survive, they submit to the creditor’s demands and are often weakened as a result, shedding workers and services that shrink customers and income.
The straightforward way to stop usury is to enact a hard legal limit on the interest rates creditors can charge borrowers. In the House, several legislators introduced interest-rate caps, but party leaders would not let the issue get a roll call vote. Rep. Maurice Hinchey of New York and co-sponsors proposed an interest-rate cap of 18 percent, the same ceiling enacted years ago for credit unions. “Offering the amendment raised a lot of anxiety on the part of a lot of people,” Hinchey said.
http://www.thenation.com/doc/20090615/scheer
~~~
BR: Grieder and I mostly agree on the Reagan thing — too attenuated to blame for the radical deregulation of Grasmm and others. See Krugman’s Crisis Responsibility: Reagan or Bush ? and How Much is Reagan Responsible for Bailout Nation ?]
But on to Carney — the fact that someone changed their mind does not make them right. It could merely mean that they have poor judgment or are easily persuaded. And when I read John’s rhetoric — it is blessedly evidence free, and he ignores reams of data disproving the claim — I do not find it persuasive in the least.
The posts look to me like phoney LINKBAIT.
For those who want the pointers from the Big Picture, they are going to need to do better than that
June 26th, 2009 at 2:33 am
Carney’s article is part of the wingnut’s attack on Sotomayor, e.g.
http://www.businessinsider.com/sonia-sotomayors-mortgage-policy-problem-2009-6
Those of you who think Barry has a fetish about the CRA must not have any wingnut friends or relatives. Any discussion of the current financial disaster becomes one of how the CRA caused it all and, yes, it was Bill Clinton’s fault. These wingnuts are impossible to reason with since they don’t operate on reason or facts, just what Rush, Hannity, or whomever told them. You finally just stop botherng to argue with them and they think they’ve won.
~~~
BR: My circle of friends and colleagues are all reality based, so I don’t come into contact with many wingnuts.
I do know lots of conservatives and libertarians, but they have long since learned to stay avoid non-reality based chatter lest they be disemboweled.
June 26th, 2009 at 3:07 am
Right wingers should be a lot more upset by the fact that the CRA gives the feds legal cover from the states. The states no longer have jurisdiction over their own banks.
@l_emmerdeur
Your problem is not with CRA. All CRA did was require the reporting of statistics that included what race an applicant associated himself with and neighborhood, etc.
No decisions were to be based on this. It was an attempt to show banks how, in aggregate, they were redlining certain neighborhoods. The banks knew they were doing it, they just would never admit it. Then comes the CRA, add GIS, and the picture became pretty clear. Barry posted some maps, if I remember correctly, Cleveland. It was an attempt to embarrass banks into getting rid of the practice of redlining certain neighborhoods.
The banks have been fighting it tooth and nail. The birth of GIS in real estate was like lifting a rock and finding all sorts of blood sucking insects under it.
Last I heard Cuomo was actually in a fight with the Obama administration about the CRA. Obama took over the Bush stance on enforcing the reporting rules.
The CRA is a law that they may not even be complying with, that is the stance Cuomo was taking a month or two ago.
Not at all a fan of Cuomo at all, but for a while he was barking up the right tree. I want to see more of those maps too…..
June 26th, 2009 at 6:37 am
The whole argument is bogus.. This is NOT simply a sub-prime crisis. If it were than Paulsen and the Fed would have been correct in their assertion that it was contained. Does anyone think it was contained? Sub-prime let them sink deeper into the mess, the lowest layer of credit demand.
June 26th, 2009 at 6:47 am
The reason John Carney’s take is bizarre is that this story is not based on any fact. The GOP rolled this talking point out before the numbers were in. Then once they were in…
http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4136
…Carney’s still repeating it. To call it bizarre is a kind depiction (then, mullahs who are claiming the demonstrations in Tehran are caused by outsiders is also bizarre.)
Bush allowed banks too much leverage. Reagan’s gifts were 1) to take away down payments and 2) his replacement for Volcker, Greenspan decimated the regulatory esprit de corps, thinking banks would regulate themselves.
And now – yesterday to be exact – the right wing’s going after Bernanke. Some future Amity Shlaes will scribble the story that the wing nuts will be telling years from now how Obama and Bernanke’s heavy-handed regulation and threats caused big banks to go bankrupt… oh and minorities, too.
June 26th, 2009 at 9:28 am
John Carney is paid by the word!
I’m serious
June 26th, 2009 at 9:54 am
One thing about Carney, he is smart enough that when he writes something that someone can criticize, he makes sure the criticism is by someone named Felix.