Topic: WorldNetDaily
Stan Marszalk writes in an Aug. 19 WND column:
American leaders have been overloading the economy with debt to pay for goodies promised to the populace since long before Obama, but the first big push for outright misallocation of capital (something strongly promoted by progressives) started with the Community Reinvestment Act of 1977, signed by Jimmy Carter. After all, the two principal economic engines driving the U.S. economy were automobiles and housing. The Act forced banks to misdirect their investment capital to areas and individuals that previously did not merit credit because of the high risks involved.
Thus, in place of 30-year mortgage loans that in the 1960s had fairly strict standards and required 20 percent down, we ended up with “liar loans” and 0 percent down, all with the support of Fannie Mae and the blessings of progressive officialdom.
Marszalk gets two things wrong here. First, the CRA did not force banks to "misdirect their investment capital to areas and individuals that previously did not merit credit." The CRA was created to fight "redlining," he practice of denying, or charging more for, banking services in certain neighborhoods due to their racial makeup, regardless of the actual riskiness of the loan. Ellen Seidman, who headed the Office of Thrift Supervision in the late 1990s, points out that the CRA does neither encourages nor condones bad lending.
Second, the CRA was not responsible for loosened loan standards that resulted in the 2008 financial crisis. In fact, loans subject to CRA regulations were less likely to default as loans made by lenders not subject to CRA regulations.
