Blog for our Future: Countering The Lie About Race And The Meltdown

Blog for our Future (9/28/08)

Countering The Lie About Race And The Meltdown

The pernicious lie that a law designed to increase lending to people of color and in lower-income neighborhoods played a key role in the financial meltdown in Wall Street won’t go away, even though there’s no evidence to support it. And now House conservatives are being asked to take a stand: Embrace a lie, and with it a return to the housing and lending discrimination that preceded the 1970s, or admit that the Community Reinvestment Act has largely succeeded in fostering lending practices that are both equitable and responsible.

Rep. Keith Ellison, D-Minn., sent a letter on Friday to House Minority Leader John Boehner on behalf of the Congressional Black Caucus asking if the idea that it was “lending to minority communities that caused the current financial crisis (represents) the position of the Republican Caucus.”

Ellison’s letter states:

It is clear from Rep. Bachmann’s comments that she believes that the bipartisan laws enacted over the past decade ensuring that minority communities have equal access to banking and other financial services are the cause of this financial meltdown. … There is no evidence to support Rep. Bachmann’s assertion that “minorities” caused the current financial crisis. Laws designed to open opportunities for equal access to credit does not require banks or thrifts to make loans that are unsafe or unprofitable. In fact, laws like the CRA mandate exactly the opposite. The law stipulates that CRA lending activities must be done consistent with safe and sound banking practices. Additionally, research clearly shows that the majority of the predatory loans that have led us to this financial mess were originated by non-bank financial institutions and other entities that did NOT have a CRA obligation and lacked strong federal regulatory oversight. Shifting the blame for the current economic crisis to laws that allow equal access and opportunity to communities of color is ridiculous.

One study that supports Ellison’s point was done in January by Traiger & Hinckley, a New York housing law firm. “Our study concludes that CRA Banks were substantially less likely than other lenders to make the kinds of risky home purchase loans that helped fuel the foreclosure crisis,” the report said.

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