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An investmentfonds wikipedia free fund also index tracker is a mutual fund or exchange-traded fund ETF designed to follow certain preset rules so that the fund can track a specified basket johann pfeiffer iforex underlying investments. Index funds may also have rules that screen for social and sustainable criteria. An index fund's rules of construction clearly identify the type of companies suitable for the fund. Additional index funds within these geographic markets may include indexes of companies that include rules based on company characteristics or factors, such as companies that are small, mid-sized, large, small value, large value, small growth, large growth, the level of gross profitability or investment capital, real estate, or indexes based on commodities and fixed-income. Companies are purchased and held within the index fund when they meet the specific index rules or parameters and are sold when they move outside of those rules or parameters. Think of an index fund as an investment utilizing rules-based investing.

Wiki community reinvestment act credit usd czk

Wiki community reinvestment act credit

Three years later, commercial real estate started feeling the effects. Gierach, a real estate attorney and CPA, wrote:. In other words, the borrowers did not cause the loans to go bad, it was the economy. In their book on the crisis, journalists McLean and Nocera argue that the GSEs Fannie and Freddie followed rather than led the private sector into subprime lending. Just one year later, it dropped to There was no question about why this was happening: the subprime mortgage originators were starting to dominate the market.

They didn't need Fannie and Freddie to guarantee their loans As Fannie's market share dropped, the company's investors grew restless Among its key recommendations for increasing In a article on Fannie Mae, the New York Times describes the company as responding to pressure rather than setting the pace in lending.

By , "competitors were snatching lucrative parts of its business. Congress was demanding that [it] help steer more loans to low-income borrowers. Lenders were threatening to sell directly to Wall Street unless Fannie bought a bigger chunk of their riskiest loans" [79]. According to Journalist McLean, "the theory that the GSEs are to blame for the crisis" is a "canard", that "has been thoroughly discredited, again and again. The Government Accountability Office estimated a far smaller number for subprime loans outstanding than Pinto.

Pinto stated that, at the time the market collapsed, half of all U. The GAO estimated in that only 4. Significantly, the SEC alleged and still maintains that Fannie Mae and Freddie Mac reported as subprime and substandard less than 10 percent of their actual subprime and substandard loans. By contrast, the national average was 9. The Fannie and Freddie Alt-A default rate is similarly much lower than the national default rate.

The only possible explanation for this is that many of the loans being characterized by the S. Still another criticism of Wallison is that insofar as Fannie and Freddie contributed to the crisis, its own profit seeking and not government mandates for expanded homeownership are the cause. The GSEs were far more concerned to maximize their profits than to meet these goals; they were borrowing at low rates to buy high-paying mortgage securities once their accounting irregularities were behind them.

Most disturbing about the GSEs, they refused to maintain adequate capital as a cushion against losses, despite demands from their own regulators that they do so. Nocera's contention notwithstanding, at least one executive at Fannie Mae had an entirely different viewpoint, stating in an interview:.

Everybody understood that we were now buying loans that we would have previously rejected, and that the models were telling us that we were charging way too little, but our mandate was to stay relevant and to serve low-income borrowers. So that's what we did. Wallison has cited New York Times columnist Gretchen Morgenson and her book Reckless Endangerment as demonstrating that "the Democratic political operative" Jim Johnson turned Fannie Mae "into a political machine that created and exploited the government housing policies that were central to the financial crisis and led the way for Wall Street".

Announcing the conservatorship on 7 September , GSE regulator Jim Lockhart stated: "To promote stability in the secondary mortgage market and lower the cost of funding, the GSEs will modestly increase their MBS portfolios through the end of Then, to address systemic risk, in their portfolios will begin to be gradually reduced at the rate of 10 percent per year, largely through natural run off, eventually stabilizing at a lower, less risky size.

According to Jeff Madrick and Frank Partnoy , the GSEs ended up in conservatorship because of the sharpness of the drop in housing prices, and despite the fact that they "never took nearly the risks that the private market took. It … was mostly associated with purchases of risky-but-not-subprime mortgages and insufficient capital to cover the decline in property values.

The Act was set in place to encourage banks to halt the practice of lending discrimination. There is debate among economists regarding the effect of the CRA, with detractors claiming it encourages lending to uncreditworthy consumers [99] [] [] and defenders claiming a thirty-year history of lending without increased risk. Many subprime lenders were not subject to the CRA.

Loans made by CRA-regulated lenders in the neighborhoods in which they were required to lend were half as likely to default as similar loans made in the same neighborhoods by independent mortgage originators not subject to the law. The crisis can be explained without resorting to these factors. Detractors assert that the early years of the CRA were relatively innocuous; however, amendments to CRA, made in the mids, increased the amount of home loans to unqualified low-income borrowers and, for the first time, allowed the securitization of CRA-regulated loans containing subprime mortgages.

Economist Paul Krugman notes the subprime boom "was overwhelmingly driven" by loan originators who were not subject to the Community Reinvestment Act. The banks were half as likely to resell the loans to other parties. And the fact is, the lending practices that are causing problems today were driven by a desire for market share and revenue growth However, research suggests that many banks felt heavily pressured.

For example, Bostic and Robinson found that lenders seem to view CRA agreements "as a form of insurance against the potentially large and unknown costs Second, CRA-related loans appear to perform comparably to other types of subprime loans. He also charged that "approximately 50 percent of CRA loans for single-family residences For that reason, the direct impact of CRA on the volume of subprime lending is not certain.

They were convinced that they could safely fund the massive expansion of housing credit. That they were wrong is not proof in and of itself that they were willing to sacrifice profits for altruistic ideals. The CRA was revived in the s, during the merger fever among banks. The fragmented banking system was a legacy of state-level anti-branching laws.

Without branches and national diversification, banks were subject to local economic downturns. In the aftermath of the Savings and loan crisis a decade of mergers consolidated the banking industry. During the Clinton administration, the CRA was reinvigorated and used to control mergers.

A poor rating prevented mergers. Community activist groups became an important part of the merger process. Their support was crucial to most mergers and in return the banks supported their organizations. Banks that refused to abandon traditional credit practices remained small.

By controlling the merger process the government was able to breed easy-credit banks by a process of artificial selection. Steven D. Gjerstad and Vernon L. They conclude "the CRA is neither absolved of playing a role in the crisis nor faulted as a root cause. It was, however, part of an emerging consensus among lenders, government and the public for easy credit. Economists Paul Krugman and David Min point out that the simultaneous growth of the residential, commercial real estate—and also consumer credit—pricing bubbles in the US and general financial crisis outside it, undermines the case that Fannie Mae , Freddie Mac , CRA, or predatory lending were primary causes of the crisis, since affordable housing policies did not effect either US commercial real estate or non-US real estate.

Writing in January , three of the four Republicans on the FCIC Commission [41] also agreed that the concurrent commercial real estate boom showed that U. Countering the analysis of Krugman and members of the FCIC, Peter Wallison argues that the crisis was caused by the bursting of a real estate bubble that was supported largely by low or no-down-payment loans, which was uniquely the case for U.

Krugman's analysis is also challenged by other analysis. After researching the default of commercial loans during the financial crisis, Xudong An and Anthony B. Critics of U. Economist Thomas Sowell wrote in "Lax lending standards used to meet 'affordable housing' quotas were the key to the American mortgage crisis. The Department of Housing and Urban Development HUD loosened mortgage restrictions in the mids so first-time buyers could qualify for loans that they could never get before.

This resulted in the agencies purchasing subprime securities. Initially, the legislation required that 30 percent or more of Fannie's and Freddie's loan purchases be related to affordable housing. However, HUD was given the power to set future requirements. In HUD mandated that 40 percent of Fannie and Freddie's loan purchases would have to support affordable housing. Under the Bush Administration HUD continued to pressure Fannie and Freddie to increase affordable housing purchases — to as high as 56 percent by the year To satisfy these mandates, Fannie and Freddie announced low-income and minority loan commitments.

Until relatively recently, "subprime" was praised by at least some members of the U. In a speech in the Housing Bureau for Senior's Conference, Edward Gramlich, a former Governor of the Federal Reserve Board, distinguished predatory lending from subprime lending: "In understanding the problem, it is particularly important to distinguish predatory lending from generally beneficial subprime lending… Subprime lending … refers to entirely appropriate and legal lending to borrowers who do not qualify for prime rates….

Gramlich also cited the importance of subprime lending to the government's afforable housing efforts: " Much of this increased [affordable housing] lending can be attributed to the development of the subprime mortgage market…. Affordable housing policies led to a degrading of underwriting standards for loans of all sizes.

This page document represented the viewpoints of HUD, Fannie Mae, Freddie Mac, leaders of the housing industry, various banks, numerous activist organizations such as ACORN and La Raza, and representatives from several state and local governments. As part of the National Homeownership Strategy, HUD advocated greater involvement of state and local organizations in the promotion of affordable housing.

Instead of going to the family, the monthly voucher is paid to [the NRC affiliates]. HUD also praised Fannie and Freddie for their efforts to promote lending flexibility: "In recent years many mortgagees have increased underwriting flexibility. This increased flexibility is due, at least in part to … liberalized affordable housing underwriting criteria established by secondary market investors such as Fannie Mae and Freddie Mac.

Criticism of the HUD strategy and the resultant relaxation of standards was criticized by at least one research company years prior to the subprime mortgage crisis. In "the long run, they do not increase national production but encourage malinvestment. The FHLB provides loans to banks that are in turn backed by mortgages. Although they are one step removed from direct mortgage lending, some of the broader policy issues are similar between the FHLB and the other GSEs.

As noted, the National Homeownership Strategy, which advocated a general loosening of lending standards, at least with regard to affordable housing, was devised in by HUD under the Clinton Administration. During the rest of the Clinton Administration HUD set increasingly rigorous affordable housing loan requirements for Fannie and Freddie.

The changes were extensive and, in the opinion of critics, very destructive. Under the new rules, banks and thrifts were to be evaluated "based on the number and amount of loans issued within their assessment areas, the geographical distribution of those loans, the distribution of loans based on borrower characteristics, the number and amount of community development loans, and the amount of innovation and flexibility they used when approving loans.

President Bush advocated the " Ownership society. But his housing policies and hands-off approach to regulation encouraged lax lending standards. There appears to be ample evidence that the Bush administration recognized both the risk of subprimes, and specifically the risks posed by the GSE's who had an implicit guarantee of government backing. For example, in , the Bush administration, recognizing that the current regulators for Fannie and Freddie were inadequate, proposed that a new agency be created to regulate the GSE's.

This new agency would have been tasked specifically with setting capital reserve requirements, removing that authority from Congress , approving new lines business for the GSE's, and most importantly, evaluating the risk in their ballooning portfolios. It was in specific response to this regulatory effort that Barney Frank made his now infamous statement "These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.

This accounting scandal would later force the resignation of Franklin Raines and others executives. In Oxley's words, "All the hand wringing and bedwetting is going on without remembering how the House stepped up on this. What did we get from the White House? We got a one-finger salute. Some economists, such as John Taylor, [] have asserted that the Fed was responsible, or at least partially responsible, for the United States housing bubble which occurred prior to the recession.

They claim that the Fed kept interest rates too low following the recession, [] The housing bubble then led to the credit crunch. Then-Chairman Alan Greenspan disputes this interpretation. He points out that the Fed's control over the long-term interest rates critics have in mind is only indirect.

The Fed did raise the short-term interest rate over which it has control i. The Federal Reserve's role as a supervisor and regulator has been criticized as being ineffective. Former U. Senator Chris Dodd , then-chairman of the United States Senate Committee on Banking, Housing, and Urban Affairs , remarked about the Fed's role in the present economic crisis, "We saw over the last number of years when they took on consumer protection responsibilities and the regulation of bank holding companies, it was an abysmal failure.

According to Bethany McLean and Joe Nocera , Federal Reserve chairman Alan Greenspan 's ideologically opposition to government regulation was unmoved either by complaints by grassroots "housing advocates" about the damage to low income communities by predatory mortgage lending in the early s, by the failure of market forces to prevent an early, smaller subprime bubble and bust in the late s, or by appeals by Reserve board governor Edward Gramlich to take a more active role in policing the subprime business.

A related criticism is made by economist Raghuram Rajan Governor of Reserve Bank of India who in a book on the financial crisis also argues that the low interest rate policy of the Greenspan Fed both allowed and motivated investors to seek out risk investments offering higher returns, leading to the subprime crisis as well as the Dot-com bubble.

Many existing laws and regulations were not effectively enforced prior to the crisis. The SEC was criticized for relaxing investment bank oversight and requiring inadequate risk disclosures by banks. The FDIC allowed banks to shift large amounts of liabilities off-balance sheet, thereby circumventing depository banking capital requirements.

The Federal Reserve was criticized for not properly monitoring the quality of mortgage originations. As a result of this culture and the revolving door between Wall Street and Washington, regulators failed to act notwithstanding important warning signs in the form of a series of financial crises, including the savings and loan crisis , the Long-Term Capital Management LTCM crisis, each of which necessitated major bailouts, and the derivatives scandals of The bailout of LTCM sent the signal to large " too-big-to-fail " financial firms that they would not have to suffer the consequences of the great risks they take.

Once the crisis hit its critical stage in September , the regulators did not consistently apply remedies available to them, thereby increasing uncertainty. Journalist Gretchen Morgenson cites the Financial Crisis Inquiry Commission as noting with disapproval that during the course of the housing boom from to , the Federal Reserve "referred a grand total of three institutions to prosecutors for possible fair-lending violations in mortgages. During the investment banking crisis in , some analysts blamed the Securities and Exchange Commission SEC for its decision that, they claimed, allowed greater leverage.

This leverage enabled investment banks to substantially increase the level of debt they were taking on, fueling the growth in mortgage-backed securities supporting subprime mortgages. The critics note that the top five US investment banks each significantly increased their financial leverage during the — time period see diagram , which increased their vulnerability to the MBS losses. Three of the five either went bankrupt Lehman Brothers or were sold at fire-sale prices to other banks Bear Stearns and Merrill Lynch during , creating instability in the global financial system.

This change, still more stringent than the international Basel accords , was motivated by the goal of keeping American banks competitive with European banks. The reduced capital requirements encouraged banks to hold the less risky A rated securities according to rating agency standards rather than the more risky higher-leveraged i.

The reduction in capital reserves and increased explicit leveraged was accompanied by the reduction of risky lower rated securities that had higher internal leverage. At least one prominent official within the SEC has rejected the notion that the SEC changes caused the banks to reduce their capital reserves.

In an April 9, speech, Erik Sirri, then Director of the SEC's Division of Trading and Markets, stated "[t]he Commission did not undo any leverage restrictions in ," nor did it intend to make a substantial reduction. Those 5 entities used an alternative standard, and had done so for decades. Specifically, they calculated capital requirements as a percentage of customer receivables and not on the basis of the investments they held. Under the standard in use, the emphasis was on their ability to meet customer-related obligations - not on overall bank financial stability.

Some argue that leverage ratios did not change as dramatically as claimed by critics. Erik Sirri , then Director of the SEC's Division of Trading and Markets, concluded: "Since August , commenters in the press and elsewhere have suggested that the amendments … allowed these firms to increase their debt-to-capital ratios to unsafe levels well-above to1, indeed to to-1…. While this theme has been repeated often in the press and elsewhere, it lacks foundation in fact. The SEC is also responsible for establishing financial disclosure rules.

Critics have argued that disclosure throughout the crisis was ineffective, particularly regarding the health of financial institutions and the valuation of mortgage-backed securities. The Commodity Futures Modernization Act of exempted derivatives from regulation, supervision, trading on established exchanges, and capital reserve requirements for major participants.

Concerns that counterparties to derivative deals would be unable to pay their obligations caused pervasive uncertainty during the crisis. Particularly relevant to the crisis are credit default swaps CDS , a derivative in which Party A pays Party B what is essentially an insurance premium, in exchange for payment should Party C default on its obligations. Warren Buffett famously referred to derivatives as "financial weapons of mass destruction" in early Like all swaps and other derivatives , CDS may either be used to hedge risks specifically, to insure creditors against default or to profit from speculation.

Derivatives usage grew dramatically in the years preceding the crisis. CDS are lightly regulated. Required disclosure of CDS-related obligations has been criticized as inadequate. These firms had to obtain additional funds capital to offset this exposure. Like all swaps and other pure wagers , what one party loses under a CDS, the other party gains; CDSs merely reallocate existing wealth [that is, provided that the paying party can perform]. Hence the question is which side of the CDS will have to pay and will it be able to do so.

Economist Joseph Stiglitz summarized how credit default swaps contributed to the systemic meltdown: "With this complicated intertwining of bets of great magnitude, no one could be sure of the financial position of anyone else-or even of one's own position.

Not surprisingly, the credit markets froze. This bill would provide the authority to suspend CDS trading under certain conditions. This is analogous to allowing many persons to buy insurance on the same house. Speculators that bought CDS insurance were betting that significant defaults would occur, while the sellers such as AIG bet they would not.

A theoretically infinite amount could be wagered on the same housing-related securities, provided buyers and sellers of the CDS could be found. NY Insurance Superintendent Eric Dinallo argued in April for the regulation of CDS and capital requirements sufficient to support financial commitments made by institutions. They were the major cause of AIG's — and by extension the banks' — problems In sum, if you offer a guarantee — no matter whether you call it a banking deposit, an insurance policy, or a bet — regulation should ensure you have the capital to deliver.

Treasury Secretary Timothy Geithner has proposed a framework for legislation to regulate derivatives. Rating agencies such as Moody's and Standard and Poor's provide risk ratings for securities such as bonds and the mortgage-backed securities at the heart of the crisis. They are paid by the company issuing the bonds, which presents an independence issue.

The rating agencies grossly erred in their assessment of risky mortgage-backed securities, providing the highest safety rating to securities that later became worthless. The Financial Crisis Inquiry Commission reported in January that: "The three credit rating agencies were key enablers of the financial meltdown. The mortgage-related securities at the heart of the crisis could not have been marketed and sold without their seal of approval.

Investors relied on them, often blindly. In some cases, they were obligated to use them, or regulatory capital standards were hinged on them. This crisis could not have happened without the rating agencies. Their ratings helped the market soar and their downgrades through and wreaked havoc across markets and firms.

Some have argued that, despite attempts by various U. During March congressional hearings William A. Niskanen , chair of the Cato Institute , criticized the proposals for political favoritism in allocating credit and micromanagement by regulators, and that there was no assurance that banks would not be expected to operate at a loss.

He predicted they would be very costly to the economy and banking system, and that the primary long-term effect would be to contract the banking system. He recommended Congress repeal CRA. Gerald P. Government backing let Fannie and Freddie dominate the mortgage underwriting. Some lawmakers received favorable treatment from financial institutions involved in the subprime industry.

See Countrywide financial political loan scandal. In June Conde Nast Portfolio reported that numerous Washington, DC politicians over recent years had received mortgage financing at noncompetitive rates at Countrywide Financial because the corporation considered the officeholders under a program called "FOA's"—"Friends of Angelo".

Johnson also received preferential loans from the troubled mortgage lender. Fannie Mae was the biggest buyer of Countrywide's mortgages. On September 10, , U. Congressman Ron Paul gave a speech to Congress in which he argued that the then-current government policies encouraged lending to people who couldn't afford to pay the money back, and he predicted that this would lead to a bailout, and he introduced a bill to abolish these policies.

The loans were called "silent" because the primary lender was not supposed to know about them. In this way the voucher is "invisible" to the traditional lender and the family emphasis added. In addition to the use of "silent seconds" HUD condoned and promoted the use of down payment gifting programs. The amount collected from the seller was called a 'donation' but, in reality, it was simply money laundering, conducted by pious organizations that talked about the poor and needy while raking in millions in revenues.

A significant driver of economic growth during the Bush administration was home equity extraction, in essence borrowing against the value of the home to finance personal consumption. Using the home as a source of funds also reduced the net savings rate significantly. Economist Paul Krugman wrote in "The prosperity of a few years ago, such as it was — profits were terrific, wages not so much — depended on a huge bubble in housing, which replaced an earlier huge bubble in stocks.

And since the housing bubble isn't coming back, the spending that sustained the economy in the pre-crisis years isn't coming back either. A taxpayer-funded government bailout of financial institutions during the savings and loan crisis may have created a moral hazard and acted as encouragement to lenders to make similar higher risk loans.

Additionally, this guidance will generally not apply to:. From Wikipedia, the free encyclopedia. Part of a series on The Great Recession. Major aspects. Causes of the European debt crisis Causes of the United States housing bubble Credit rating agencies and the subprime crisis Government policies and the subprime mortgage crisis. Summit meetings. Government response and policy proposals. Business failures. Widespread as this belief has become in conservative circles, virtually all serious attempts to evaluate the evidence have concluded that there is little merit in this view.

Main article: Community Reinvestment Act. Further information: Criticism of the Federal Reserve. Further information: Credit rating agencies and the subprime crisis. Further information: Moral hazard. Retrieved The Return of Depression Economics and the Crisis of Norton Company Limited. New York: Algora Publishing. The New York Times. Archived from the original on April 25, Financial Shock.

FT Press. Vanity Fair. The American Prospect. Archived from the original on New York Times. Wallison October 15, Wall Street Journal. For more information, please visit our webpage on the proposed rulemaking.

To submit a comment on the advance notice of proposed rulemaking ANPR , please click here or email regs. The Community Reinvestment Act CRA , enacted in , requires the Federal Reserve and other federal banking regulators to encourage financial institutions to help meet the credit needs of the communities in which they do business, including low- and moderate-income LMI neighborhoods. Three federal banking agencies, or regulators, are responsible for the CRA.

Banks that have CRA obligations are supervised by one of these three regulators. Each regulator has a dedicated CRA site that provides information about the banks they oversee and those banks' CRA ratings and Performance Evaluations. The Federal Reserve supervises state member banks--or, state-chartered banks that have applied for and been accepted to be part of the Federal Reserve System--for CRA compliance.

RISK FINANCE AND INVESTMENT CORP

We had a 21st-century financial system with 19th-century safeguards. In a June speech, U. Treasury Secretary Timothy Geithner , then President and CEO of the NY Federal Reserve Bank, placed significant blame for the freezing of credit markets on a "run" on the entities in the "parallel" banking system, also called the shadow banking system. These entities became critical to the credit markets underpinning the financial system, but were not subject to the same regulatory controls.

Further, these entities were vulnerable because they borrowed short-term in liquid markets to purchase long-term, illiquid and risky assets. This meant that disruptions in credit markets would make them subject to rapid deleveraging , selling their long-term assets at depressed prices.

Economist Paul Krugman described the run on the shadow banking system as the "core of what happened" to cause the crisis. Influential figures should have proclaimed a simple rule: anything that does what a bank does, anything that has to be rescued in crises the way banks are, should be regulated like a bank.

For example, investment bank Bear Stearns was required to replenish much of its funding in overnight markets, making the firm vulnerable to credit market disruptions. When concerns arose regarding its financial strength, its ability to secure funds in these short-term markets was compromised, leading to the equivalent of a bank run. The securitization markets started to close down in the spring of and nearly shut-down in the fall of More than a third of the private credit markets thus became unavailable as a source of funds.

The Economist reported in March "Bear Stearns and Lehman Brothers were non-banks that were crippled by a silent run among panicky overnight " repo " lenders, many of them money market funds uncertain about the quality of securitized collateral they were holding. Mass redemptions from these funds after Lehman's failure froze short-term funding for big firms.

The Commission found GSE loans had a delinquency rate of 6. The GSEs participated in the expansion of subprime and other risky mortgages, but they followed rather than led Wall Street and other lenders. The three [42] wrote:.

Government entities held or guaranteed Wallsion publicized his dissent and responded to critics in a number of articles and op-ed pieces, and New York Times Columnist Joe Nocera accuses him of "almost single-handedly" creating "the myth that Fannie Mae and Freddie Mac caused the financial crisis".

Critics contend that Fannie Mae and Freddie Mac affected lending standards in many ways - ways that often had nothing to do with their direct loan purchases:. In Fannie and Freddie introduced automated underwriting systems, designed to speed-up the underwriting process.

These systems, which soon set underwriting standards for most of the industry whether or not the loans were purchased by the GSEs greatly relaxed the underwriting approval process. An independent study of about loans found that the same loans were 65 percent more likely to be approved by the automated processes versus the traditional processes. In a paper written in January , OFHEO described the process: "Once Fannie Mae and Freddie Mac began to use scoring and automated underwriting in their internal business operations, it was not long before each Enterprise required the single-family lenders with which it does business to use such tools.

Some analysts believe that the use of AVMs, especially for properties in distressed neighborhoods, led to overvaluation of the collateral backing mortgage loans. In some mainstream banks told the Wall Street Journal that Fannie and Freddie were promoting small, thinly capitalized mortgage brokers over regulated community banks, [52] by providing these brokers with automated underwriting systems. The Wall Street Journal reported that the underwriting software was "made available to thousands of mortgage brokers" and made these "brokers and other small players a threat to larger banks.

Many of the loan products sold by mortgage lenders, and criticized for their weak standards, were designed by Fannie or Freddie. For example, the "Affordable Gold " line of loans, designed by Freddie, required no down payment and no closing costs from the borrower. The closing costs could come from "a variety of sources, including a grant from a qualified institution, gift from a relative or an unsecured loan.

Countrywide, a company reported to have financed 20 percent of all United States mortgages in , had a close business relationship with Fannie Mae. Estimates of subprime loan purchases by Fannie and Freddie have ranged from zero to trillions of dollars.

For example, in Economist Paul Krugman erroneously claimed that Fannie and Freddie "didn't do any subprime lending, because they can't; the definition of a subprime loan is precisely a loan that doesn't meet the requirement, imposed by law, that Fannie and Freddie buy only mortgages issued to borrowers who made substantial down payments and carefully documented their income.

Critics claim that the amount of subprime loans reported by the two GSEs are wildly understated. The highest estimate was produced by Wallison and Edward Pinto, based on amounts reported by the Securities and Exchange Commission in conjunction with its securities fraud case against former executives of Fannie and Freddie.

The discrepancies can be attributed to the estimate sources and methods. The lowest estimate Krugman's is simply based on what is legally allowable, without regard to what was actually done. Other low estimates are simply based on the amounts reported by Fannie and Freddie in their financial statements and other reporting. As noted by Alan Greenspan, the subprime reporting by the GSEs was understated, and this fact was not widely known until "The enormous size of purchases by the GSEs [Fannie and Freddie] in — was not revealed until Fannie Mae in September reclassified a large part of its securities portfolio of prime mortgages as subprime.

The estimates of Wallison, Calomiris, and Pinto are based upon analysis of the specific characteristics of the loans. For example, Wallison and Calomiris used 5 factors which, they believe, indicate subprime lending. Those factors are negative loan amortization, interest-only payments, down-payments under 10 percent, low-documentation, and low FICO credit scores.

When Fannie or Freddie bought subprime loans they were taking a chance because, as noted by Paul Krugman, "a subprime loan is precisely a loan that doesn't meet the requirement, imposed by law, that Fannie and Freddie buy only mortgages issued to borrowers who made substantial down payments and carefully documented their income. However, some loans were so clearly lacking in quality that Fannie and Freddie wouldn't take a chance on buying them.

Nevertheless, the two GSEs promoted the subprime loans that they could not buy. He said that Freddie could usually find a way to buy and securitize their affordable housing loans 'through the use of Loan Prospector research and creative credit enhancements ….

Miller added: 'But what can you do if after all this analysis the product you are holding is not up to the standards of the conventional secondary market? The GSEs had a pioneering role in expanding the use of subprime loans: In , Franklin Raines first put Fannie Mae into subprimes, following up on earlier Fannie Mae efforts in the s, which reduced mortgage down payment requirements. At this time, subprimes represented a tiny fraction of the overall mortgage market.

From forward, private lenders increased their share of subprime lending, and later issued many of the riskiest loans. However, attempts to defend Fannie Mae and Freddie Mac for their role in the crisis, by citing their declining market share in subprimes after , ignore the fact that the GSE's had largely created this market, and even worked closely with some of the worst private lending offenders, such as Countrywide.

In , one out of every four loans purchased by Fannie Mae came from Countrywide. Joseph Stiglitz [73]. Countering Krugman's analysis, Peter Wallison argues that the crisis was caused by the bursting of a real estate bubble that was supported largely by low or no-down-payment loans, which was uniquely the case for U. Sanders reported in December : "We find limited evidence that substantial deterioration in CMBS [commercial mortgage-backed securities] loan underwriting occurred prior to the crisis.

Business journalist Kimberly Amadeo reports: "The first signs of decline in residential real estate occurred in Three years later, commercial real estate started feeling the effects. Gierach, a real estate attorney and CPA, wrote:. In other words, the borrowers did not cause the loans to go bad, it was the economy. In their book on the crisis, journalists McLean and Nocera argue that the GSEs Fannie and Freddie followed rather than led the private sector into subprime lending.

Just one year later, it dropped to There was no question about why this was happening: the subprime mortgage originators were starting to dominate the market. They didn't need Fannie and Freddie to guarantee their loans As Fannie's market share dropped, the company's investors grew restless Among its key recommendations for increasing In a article on Fannie Mae, the New York Times describes the company as responding to pressure rather than setting the pace in lending.

By , "competitors were snatching lucrative parts of its business. Congress was demanding that [it] help steer more loans to low-income borrowers. Lenders were threatening to sell directly to Wall Street unless Fannie bought a bigger chunk of their riskiest loans" [79]. According to Journalist McLean, "the theory that the GSEs are to blame for the crisis" is a "canard", that "has been thoroughly discredited, again and again.

The Government Accountability Office estimated a far smaller number for subprime loans outstanding than Pinto. Pinto stated that, at the time the market collapsed, half of all U. The GAO estimated in that only 4. Significantly, the SEC alleged and still maintains that Fannie Mae and Freddie Mac reported as subprime and substandard less than 10 percent of their actual subprime and substandard loans.

By contrast, the national average was 9. The Fannie and Freddie Alt-A default rate is similarly much lower than the national default rate. The only possible explanation for this is that many of the loans being characterized by the S. Still another criticism of Wallison is that insofar as Fannie and Freddie contributed to the crisis, its own profit seeking and not government mandates for expanded homeownership are the cause. The GSEs were far more concerned to maximize their profits than to meet these goals; they were borrowing at low rates to buy high-paying mortgage securities once their accounting irregularities were behind them.

Most disturbing about the GSEs, they refused to maintain adequate capital as a cushion against losses, despite demands from their own regulators that they do so. Nocera's contention notwithstanding, at least one executive at Fannie Mae had an entirely different viewpoint, stating in an interview:. Everybody understood that we were now buying loans that we would have previously rejected, and that the models were telling us that we were charging way too little, but our mandate was to stay relevant and to serve low-income borrowers.

So that's what we did. Wallison has cited New York Times columnist Gretchen Morgenson and her book Reckless Endangerment as demonstrating that "the Democratic political operative" Jim Johnson turned Fannie Mae "into a political machine that created and exploited the government housing policies that were central to the financial crisis and led the way for Wall Street".

Announcing the conservatorship on 7 September , GSE regulator Jim Lockhart stated: "To promote stability in the secondary mortgage market and lower the cost of funding, the GSEs will modestly increase their MBS portfolios through the end of Then, to address systemic risk, in their portfolios will begin to be gradually reduced at the rate of 10 percent per year, largely through natural run off, eventually stabilizing at a lower, less risky size.

According to Jeff Madrick and Frank Partnoy , the GSEs ended up in conservatorship because of the sharpness of the drop in housing prices, and despite the fact that they "never took nearly the risks that the private market took.

It … was mostly associated with purchases of risky-but-not-subprime mortgages and insufficient capital to cover the decline in property values. The Act was set in place to encourage banks to halt the practice of lending discrimination. There is debate among economists regarding the effect of the CRA, with detractors claiming it encourages lending to uncreditworthy consumers [99] [] [] and defenders claiming a thirty-year history of lending without increased risk.

Many subprime lenders were not subject to the CRA. Loans made by CRA-regulated lenders in the neighborhoods in which they were required to lend were half as likely to default as similar loans made in the same neighborhoods by independent mortgage originators not subject to the law.

The crisis can be explained without resorting to these factors. Detractors assert that the early years of the CRA were relatively innocuous; however, amendments to CRA, made in the mids, increased the amount of home loans to unqualified low-income borrowers and, for the first time, allowed the securitization of CRA-regulated loans containing subprime mortgages.

Economist Paul Krugman notes the subprime boom "was overwhelmingly driven" by loan originators who were not subject to the Community Reinvestment Act. The banks were half as likely to resell the loans to other parties. And the fact is, the lending practices that are causing problems today were driven by a desire for market share and revenue growth However, research suggests that many banks felt heavily pressured.

For example, Bostic and Robinson found that lenders seem to view CRA agreements "as a form of insurance against the potentially large and unknown costs Second, CRA-related loans appear to perform comparably to other types of subprime loans. He also charged that "approximately 50 percent of CRA loans for single-family residences For that reason, the direct impact of CRA on the volume of subprime lending is not certain.

They were convinced that they could safely fund the massive expansion of housing credit. That they were wrong is not proof in and of itself that they were willing to sacrifice profits for altruistic ideals. The CRA was revived in the s, during the merger fever among banks. The fragmented banking system was a legacy of state-level anti-branching laws.

Without branches and national diversification, banks were subject to local economic downturns. In the aftermath of the Savings and loan crisis a decade of mergers consolidated the banking industry. During the Clinton administration, the CRA was reinvigorated and used to control mergers. A poor rating prevented mergers. Community activist groups became an important part of the merger process. Their support was crucial to most mergers and in return the banks supported their organizations.

Banks that refused to abandon traditional credit practices remained small. By controlling the merger process the government was able to breed easy-credit banks by a process of artificial selection. Steven D. Gjerstad and Vernon L. They conclude "the CRA is neither absolved of playing a role in the crisis nor faulted as a root cause.

It was, however, part of an emerging consensus among lenders, government and the public for easy credit. Economists Paul Krugman and David Min point out that the simultaneous growth of the residential, commercial real estate—and also consumer credit—pricing bubbles in the US and general financial crisis outside it, undermines the case that Fannie Mae , Freddie Mac , CRA, or predatory lending were primary causes of the crisis, since affordable housing policies did not effect either US commercial real estate or non-US real estate.

Writing in January , three of the four Republicans on the FCIC Commission [41] also agreed that the concurrent commercial real estate boom showed that U. Countering the analysis of Krugman and members of the FCIC, Peter Wallison argues that the crisis was caused by the bursting of a real estate bubble that was supported largely by low or no-down-payment loans, which was uniquely the case for U.

Krugman's analysis is also challenged by other analysis. After researching the default of commercial loans during the financial crisis, Xudong An and Anthony B. Critics of U. Economist Thomas Sowell wrote in "Lax lending standards used to meet 'affordable housing' quotas were the key to the American mortgage crisis.

The Department of Housing and Urban Development HUD loosened mortgage restrictions in the mids so first-time buyers could qualify for loans that they could never get before. This resulted in the agencies purchasing subprime securities. Initially, the legislation required that 30 percent or more of Fannie's and Freddie's loan purchases be related to affordable housing.

However, HUD was given the power to set future requirements. In HUD mandated that 40 percent of Fannie and Freddie's loan purchases would have to support affordable housing. Under the Bush Administration HUD continued to pressure Fannie and Freddie to increase affordable housing purchases — to as high as 56 percent by the year To satisfy these mandates, Fannie and Freddie announced low-income and minority loan commitments.

Until relatively recently, "subprime" was praised by at least some members of the U. In a speech in the Housing Bureau for Senior's Conference, Edward Gramlich, a former Governor of the Federal Reserve Board, distinguished predatory lending from subprime lending: "In understanding the problem, it is particularly important to distinguish predatory lending from generally beneficial subprime lending… Subprime lending … refers to entirely appropriate and legal lending to borrowers who do not qualify for prime rates….

Gramlich also cited the importance of subprime lending to the government's afforable housing efforts: " Much of this increased [affordable housing] lending can be attributed to the development of the subprime mortgage market…. Affordable housing policies led to a degrading of underwriting standards for loans of all sizes. This page document represented the viewpoints of HUD, Fannie Mae, Freddie Mac, leaders of the housing industry, various banks, numerous activist organizations such as ACORN and La Raza, and representatives from several state and local governments.

As part of the National Homeownership Strategy, HUD advocated greater involvement of state and local organizations in the promotion of affordable housing. Instead of going to the family, the monthly voucher is paid to [the NRC affiliates]. HUD also praised Fannie and Freddie for their efforts to promote lending flexibility: "In recent years many mortgagees have increased underwriting flexibility.

This increased flexibility is due, at least in part to … liberalized affordable housing underwriting criteria established by secondary market investors such as Fannie Mae and Freddie Mac. Criticism of the HUD strategy and the resultant relaxation of standards was criticized by at least one research company years prior to the subprime mortgage crisis.

In "the long run, they do not increase national production but encourage malinvestment. The FHLB provides loans to banks that are in turn backed by mortgages. Although they are one step removed from direct mortgage lending, some of the broader policy issues are similar between the FHLB and the other GSEs.

As noted, the National Homeownership Strategy, which advocated a general loosening of lending standards, at least with regard to affordable housing, was devised in by HUD under the Clinton Administration. During the rest of the Clinton Administration HUD set increasingly rigorous affordable housing loan requirements for Fannie and Freddie.

The changes were extensive and, in the opinion of critics, very destructive. Under the new rules, banks and thrifts were to be evaluated "based on the number and amount of loans issued within their assessment areas, the geographical distribution of those loans, the distribution of loans based on borrower characteristics, the number and amount of community development loans, and the amount of innovation and flexibility they used when approving loans. President Bush advocated the " Ownership society.

But his housing policies and hands-off approach to regulation encouraged lax lending standards. There appears to be ample evidence that the Bush administration recognized both the risk of subprimes, and specifically the risks posed by the GSE's who had an implicit guarantee of government backing.

For example, in , the Bush administration, recognizing that the current regulators for Fannie and Freddie were inadequate, proposed that a new agency be created to regulate the GSE's. This new agency would have been tasked specifically with setting capital reserve requirements, removing that authority from Congress , approving new lines business for the GSE's, and most importantly, evaluating the risk in their ballooning portfolios.

It was in specific response to this regulatory effort that Barney Frank made his now infamous statement "These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.

This accounting scandal would later force the resignation of Franklin Raines and others executives. In Oxley's words, "All the hand wringing and bedwetting is going on without remembering how the House stepped up on this. What did we get from the White House? We got a one-finger salute. Some economists, such as John Taylor, [] have asserted that the Fed was responsible, or at least partially responsible, for the United States housing bubble which occurred prior to the recession.

They claim that the Fed kept interest rates too low following the recession, [] The housing bubble then led to the credit crunch. Then-Chairman Alan Greenspan disputes this interpretation. He points out that the Fed's control over the long-term interest rates critics have in mind is only indirect. The Fed did raise the short-term interest rate over which it has control i. The Federal Reserve's role as a supervisor and regulator has been criticized as being ineffective.

Former U. Senator Chris Dodd , then-chairman of the United States Senate Committee on Banking, Housing, and Urban Affairs , remarked about the Fed's role in the present economic crisis, "We saw over the last number of years when they took on consumer protection responsibilities and the regulation of bank holding companies, it was an abysmal failure.

According to Bethany McLean and Joe Nocera , Federal Reserve chairman Alan Greenspan 's ideologically opposition to government regulation was unmoved either by complaints by grassroots "housing advocates" about the damage to low income communities by predatory mortgage lending in the early s, by the failure of market forces to prevent an early, smaller subprime bubble and bust in the late s, or by appeals by Reserve board governor Edward Gramlich to take a more active role in policing the subprime business.

A related criticism is made by economist Raghuram Rajan Governor of Reserve Bank of India who in a book on the financial crisis also argues that the low interest rate policy of the Greenspan Fed both allowed and motivated investors to seek out risk investments offering higher returns, leading to the subprime crisis as well as the Dot-com bubble. Many existing laws and regulations were not effectively enforced prior to the crisis. The SEC was criticized for relaxing investment bank oversight and requiring inadequate risk disclosures by banks.

The FDIC allowed banks to shift large amounts of liabilities off-balance sheet, thereby circumventing depository banking capital requirements. The Federal Reserve was criticized for not properly monitoring the quality of mortgage originations. As a result of this culture and the revolving door between Wall Street and Washington, regulators failed to act notwithstanding important warning signs in the form of a series of financial crises, including the savings and loan crisis , the Long-Term Capital Management LTCM crisis, each of which necessitated major bailouts, and the derivatives scandals of The bailout of LTCM sent the signal to large " too-big-to-fail " financial firms that they would not have to suffer the consequences of the great risks they take.

Once the crisis hit its critical stage in September , the regulators did not consistently apply remedies available to them, thereby increasing uncertainty. Journalist Gretchen Morgenson cites the Financial Crisis Inquiry Commission as noting with disapproval that during the course of the housing boom from to , the Federal Reserve "referred a grand total of three institutions to prosecutors for possible fair-lending violations in mortgages.

During the investment banking crisis in , some analysts blamed the Securities and Exchange Commission SEC for its decision that, they claimed, allowed greater leverage. This leverage enabled investment banks to substantially increase the level of debt they were taking on, fueling the growth in mortgage-backed securities supporting subprime mortgages.

The critics note that the top five US investment banks each significantly increased their financial leverage during the — time period see diagram , which increased their vulnerability to the MBS losses. Three of the five either went bankrupt Lehman Brothers or were sold at fire-sale prices to other banks Bear Stearns and Merrill Lynch during , creating instability in the global financial system.

This change, still more stringent than the international Basel accords , was motivated by the goal of keeping American banks competitive with European banks. The reduced capital requirements encouraged banks to hold the less risky A rated securities according to rating agency standards rather than the more risky higher-leveraged i. The reduction in capital reserves and increased explicit leveraged was accompanied by the reduction of risky lower rated securities that had higher internal leverage.

At least one prominent official within the SEC has rejected the notion that the SEC changes caused the banks to reduce their capital reserves. In an April 9, speech, Erik Sirri, then Director of the SEC's Division of Trading and Markets, stated "[t]he Commission did not undo any leverage restrictions in ," nor did it intend to make a substantial reduction. Those 5 entities used an alternative standard, and had done so for decades. Specifically, they calculated capital requirements as a percentage of customer receivables and not on the basis of the investments they held.

Under the standard in use, the emphasis was on their ability to meet customer-related obligations - not on overall bank financial stability. Some argue that leverage ratios did not change as dramatically as claimed by critics. Erik Sirri , then Director of the SEC's Division of Trading and Markets, concluded: "Since August , commenters in the press and elsewhere have suggested that the amendments … allowed these firms to increase their debt-to-capital ratios to unsafe levels well-above to1, indeed to to-1….

While this theme has been repeated often in the press and elsewhere, it lacks foundation in fact. The SEC is also responsible for establishing financial disclosure rules. Critics have argued that disclosure throughout the crisis was ineffective, particularly regarding the health of financial institutions and the valuation of mortgage-backed securities. The Commodity Futures Modernization Act of exempted derivatives from regulation, supervision, trading on established exchanges, and capital reserve requirements for major participants.

Concerns that counterparties to derivative deals would be unable to pay their obligations caused pervasive uncertainty during the crisis. Particularly relevant to the crisis are credit default swaps CDS , a derivative in which Party A pays Party B what is essentially an insurance premium, in exchange for payment should Party C default on its obligations. Warren Buffett famously referred to derivatives as "financial weapons of mass destruction" in early Like all swaps and other derivatives , CDS may either be used to hedge risks specifically, to insure creditors against default or to profit from speculation.

Derivatives usage grew dramatically in the years preceding the crisis. CDS are lightly regulated. Required disclosure of CDS-related obligations has been criticized as inadequate. These firms had to obtain additional funds capital to offset this exposure.

Like all swaps and other pure wagers , what one party loses under a CDS, the other party gains; CDSs merely reallocate existing wealth [that is, provided that the paying party can perform]. Hence the question is which side of the CDS will have to pay and will it be able to do so. Economist Joseph Stiglitz summarized how credit default swaps contributed to the systemic meltdown: "With this complicated intertwining of bets of great magnitude, no one could be sure of the financial position of anyone else-or even of one's own position.

Not surprisingly, the credit markets froze. This bill would provide the authority to suspend CDS trading under certain conditions. This is analogous to allowing many persons to buy insurance on the same house. Speculators that bought CDS insurance were betting that significant defaults would occur, while the sellers such as AIG bet they would not.

A theoretically infinite amount could be wagered on the same housing-related securities, provided buyers and sellers of the CDS could be found. NY Insurance Superintendent Eric Dinallo argued in April for the regulation of CDS and capital requirements sufficient to support financial commitments made by institutions. They were the major cause of AIG's — and by extension the banks' — problems In sum, if you offer a guarantee — no matter whether you call it a banking deposit, an insurance policy, or a bet — regulation should ensure you have the capital to deliver.

Treasury Secretary Timothy Geithner has proposed a framework for legislation to regulate derivatives. Rating agencies such as Moody's and Standard and Poor's provide risk ratings for securities such as bonds and the mortgage-backed securities at the heart of the crisis. They are paid by the company issuing the bonds, which presents an independence issue.

The rating agencies grossly erred in their assessment of risky mortgage-backed securities, providing the highest safety rating to securities that later became worthless. Once documented, however, these data become available at low cost to later market entrants, which meant banks had little incentive to be the first into an LMI market Bernanke ; Haltom As Sen.

The proposed law was the subject of heated debate. Critics were concerned the law would create distortions in credit markets and result in credit allocation by the federal bank regulators. They also noted an already heavy regulatory burden, and felt the CRA would encourage riskier lending.

To implement the Act, the regulatory agencies originally developed 12 assessment criteria to evaluate how banks ascertained and responded to the credit needs of their communities, and assigned banks a rating based on how they met these criteria. Regulators took and still do take these ratings into account when deciding whether to approve mergers, acquisitions, or the opening of new branches. Changes have been made to the CRA in response to complaints from both activists and bankers.

In , President Clinton directed regulators to review and revise the regulation to address concerns about the perceived costs of compliance and its emphasis on process over outcomes. In response, some Reserve Banks set up functions, separate from the supervisory function, to provide guidance and advice to community groups. The Board issued a letter asking every Reserve Bank to set up a similar group, which each one did by Community Affairs, as it was then called, evolved during the following years, as community groups became more skilled at navigating the protest process on their own.

Concurrently, banks and community groups were increasingly seeking each other out: Banks were looking for community investment opportunities, and community groups were looking for funding. So the community affairs role shifted toward facilitating relationship building to address economic challenges in low- and moderate-income communities.

In general, the evidence suggests the CRA has increased lending to LMI communities, although the magnitude is a matter of debate and it is difficult to disentangle the effects of the CRA from the effects of other regulatory and market changes. Some research has found that CRA-related lending is at least marginally profitable, although other research suggests the CRA has had little effect on bank profitability, either positive or negative Avery, Calem and Canner ; Bernanke Following the financial crisis of , some critics of the CRA argued it had contributed to the mortgage crisis by encouraging banks to make loans to riskier borrowers.

There is some evidence that CRA lending standards were relaxed in the mids; however, the bulk of defaulted mortgages during the foreclosure crisis were originated between and In addition, many of those loans were issued by mortgage lenders not subject to the CRA. Overall, the available evidence suggests the CRA was not responsible for the subprime crisis Haltom Today, some observers question if the CRA is still necessary.

Proponents of the CRA maintain that, while overt discrimination is not common, redlining now takes more subtle forms, such as limited marketing in LMI areas, new branch locations away from LMI areas, and service fee structures that favor higher income consumers.

Opponents argue that technology and credit-scoring have significantly reduced the market frictions that existed at the time the CRA was passed. Also, the CRA uses the location of actual bank buildings to determine assessment areas, but these areas might be less suitable as mobile banking makes it increasingly possible for bank customers to reside far from a branch location.

The efficacy and necessity of the CRA will continue to be a matter of debate for community stakeholders, bankers, and policymakers. There is debate about the extent to which HOLC engaged in redlining itself. See Hillier for a discussion. The amendments in and also prohibited discrimination based on sex, disability, or familial status.

The U.

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Forex bank rates What's more, George W. The Department of Housing and Urban Development HUD loosened mortgage restrictions in the mids so first-time buyers could qualify for loans that they could never get reinvestment theory choking games. Three federal banking agencies, or regulators, are responsible for the CRA. Local and regional public-private partnerships and multi-bank loan consortia were formed to expand and manage such CRA-related lending. Many existing laws and regulations were not effectively enforced prior to the crisis. He contends that the CRA is justified, has resulted in progress, and should be continued. Regulations Codified to
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Wiki community reinvestment act credit The GAO estimated in that only 4. This principle is one that federal law governing deposit insurance, bank charters, and bank mergers had embodied long maple investments the enactment of CRA. He also charged that "approximately 50 percent of CRA loans for single-family residences They conclude "the CRA is neither absolved of playing a role in the crisis nor faulted as a root cause. In a sense, you can look at the mortgage mess as what happens when CRA lending was applied much more broadly. Hence the question is which side of the CDS will have to pay and will it be able to do so. The Community Reinvestment Act encourages bank lending to low- and moderate-income neighborhoods.

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Three federal banking agencies, or regulators, are responsible for the CRA. Banks that have CRA obligations are supervised by one of these three regulators. Each regulator has a dedicated CRA site that provides information about the banks they oversee and those banks' CRA ratings and Performance Evaluations. The Federal Reserve supervises state member banks--or, state-chartered banks that have applied for and been accepted to be part of the Federal Reserve System--for CRA compliance.

To send a comment about the CRA website, please fill out our feedback form. Search Submit Search Button. Toggle Dropdown Menu. It is arguable that race polarity has not only negatively caused the social fabric to erode but has now bled into our country's financial fabric. The debate is simple: If you don't qualify for a loan, you don't get a loan. Neither race nor class should grant special treatment.

Financial socialism has been an American debacle. America is the only country in the world that has taken socialism one step further than classism and included racism. Discriminating on behalf of one group is no different than discriminating against any other group. The amendment to this section should include something about the actual social deconstruction to American society or more to the point, American Socialism verses Americanism.

At this point in history, America does not just face a mere a mortgage crisis. It faces a social crisis. And this crisis will challenge America in every Democratic institution down to the soul and spirit of Americanism. I believe the article reads well as is but needs to venture into the complexities of the thinkers and formers of the CRA.

The CRA is not consistent with American capitalism and values. That inconsistency, it can be argued, is a very probable cause to this great mortgage crisis. It can also be argued that stronger regulation is needed rather than outright government-owned or back companies. Either way, fairness does not lie in racial or class scrutiny but rather in financial scrutiny alone where mortgages are concerned.

Finally, since the government has played a great role in this crisis by sponsoring such companies, the greatest amount of responsibility lies with the lawmakers who wrote and backed the bill as well as the those who presided over the companies Fannie Mae and Freddie Mac, i. Truthinfused talk , 28 September UTC truthinfused. This article is still biased. Yes, we have a criticism section, but the "Criticism" is merely stated, without benefit of supporting argumentation.

After that, it's rebutted with two different arguments. If we're being fair, shouldn't we provide two supporting arguments? How about amending this section to read as below:. Critics claim that government policy encouraged the development of the subprime debacle through legislation like the CRA, which gave government regulators and community activists the power to force banks and other lending institutions to extend credit to otherwise uncreditworthy customers.

Defenders of CRA maintain that half of all subprime loans were made by institutions that are not subject to CRA and another substantial share of subprime loans were made by subsidiaries of banks that do not fully come under CRA. Additionally, they claim that subprime lending intensified as enforcement of CRA was abating. This gives both sides of the argument and--in my opinion--is a better representation of the facts.

Way2manyhix talk , 20 June UTC. This is a balanced addition, but if true, its relevance assumes that the default rate on the CRA subprime loans was similar to, or lower than, the default rate on the non-CRA subprime loans. Is there a reference to substantiate that? This article makes absolutely no sense to me, other than as an attempt to blame Democrats and Civil Rights Groups. It makes no sense because this act worked well for over 25 years, without causing any trouble. Plus, it does not stand up to statistical scrutiny.

Metropolitan Areas". New York, I'm from the Netherlands and don't have much expertise in this market but while trying to get a grip on the current financial problems I came across this article and found it fundamentally flawed. I got the feeling that several people who contributed to this article acted out of partisanship, without any knowledge about this market. People with more expertise in this market might want to clear it up. That distinction is not made clear in this article.

Specifically: Canner, G. Passmore; Schwartz, A. Given this is now a hot and controversial topic and lots of inline current sources will be put in, I think that we can't rely on old nonspecific references. If the originator of these are around, they should make them inline refs, preferably with page numbers. Otherwise they should either be removed entirely or if truly significant sources be put in a "Reading" section. Just FYI before I do it soon. The criticism section quotes liberal commentators who make factual mistakes, and passes of their inaccurate claims as facts.

The liberal commentator claims that half of subprime mortgages were issued by institutions not subject to the CRA. This is nonsense. They were subject to the CRA, they were simply under less regulations. This is a stretched interpretation of an article that actually blames the government for inviting the mess. Countrywide was saying that they were induced in to stretching the rules. We also have to remember that if they didn't stretch the rules and accept minorities; people like Obama went around suing banks for discrimination of minorities.

I agree that this whole section is leftist spin. It should at least present the arguments from both sides neutrally. So instead of saying: Some say CRAs caused this mess but here's why they're wrong based on this other evidence, simply present a pro and con section presenting both sides of the argument. So some say CRAs caused this mess and here's their arguments.

Others say the CRAs weren't responsible and here's their arguments. Then let the reader look at the evidence and decide. Carolmooredc - You obviously did not read my above post. You continue to include "rebuttals" and "defenses" of the CRA in a section entitled "Criticism".

The section needs to be rewritten to include only ctiticisms. My post has nothing to do with "sources". Overall, this is a pretty biased entry. It begns to read like a college term paper with a central thesis about how bad banks are. I think the best way to go is to take the editorializing out of the "Changes in " section, and creating a new "Criticism" category. This could also present the bank's points of view in a more neutral light.

Dapdeimos talk , 12 December UTC. English is not my first language, so i may be completely wrong here, but this sentence don't make sense to me. I would put it this way, CRA required banks to service underserved areas and groups or something like that. Amdsupport , 7 April UTC. Note to my talk page meant for talk , though the unsigned poster gets author wrong twice :. The fact is, these two articles merely served to further authenticate the Wikipedia article as written.

As an open-minded individual, I try to obtain all the facts on a given topic and draw my own conclusions; independent of my party affiliations. With that in mind, I was very interested in reading your submitted articles. In doing so, it became immediately clear that you were reading the articles through very liberal eyes.

The first article points out that President Bush wanted to increase the number of minority homeowners by providing government grants to minority borrowers and tax benefits to builders. His plan deals with the construction of affordable housing and does not include any form of loan deregulation.

On the other hand, the second article deals with Franklin Raines' enthusiasm for President Bush's plan. In fact, he is so enthusiastic about Bush's plan that he decides to augment it by making it easier for minorities and higher risk borrowers to obtain loans for the houses that President Bush was trying to have built.

Obviously, the construction of affordable housing did not cause the current financial crisis. If you want to point a finger, it should be directed squarely at Franklin Raines and the institutions that provided the high-risk loans.