Campaign for America’s Future: Firing Back on the CRA Libel

Campaign for America’s Future

Firing Back on the CRA Libel

Conservative pundits and politicians have piled onto the excuse like shipwreck victims clinging to a passing log: The real blame for the current economic crisis lies not with anything they did, but rather with the 1977 Community Reinvestment Act — a successful Carter-era program designed to get banks to stop covert discrimination, and encourage them to invest their money in low-income neighborhoods.

It’s always easy to tell when the cons are completely lost at sea. The lies get more absurdly preposterous — and also more transparently self-serving. But when they go so far as to openly and unapologetically latch onto race and class as an excuse for their woes (which this is, at its heart), you know they’re taking on water fast — and scared of going under entirely.

1. The CRA was a liberal boondoggle designed to con banks into funding housing for undeserving, unqualified minorities.

False. The Community Reinvestment Act of 1977 was the result of decades of disinvestment in poor and working-class neighborhoods. It was designed to put an end to “red-lining” — a widespread practice in which banks refused to write mortgages for houses in certain neighborhoods, no matter who was applying or how creditworthy they were.

2. The CRA forced banks to lower their standards and make loans to all low-income families and people with poor credit — and find banks that refused to comply.

No. The CRA has encouraged banks to lend fairly and responsibly for over 30 years. It does not impose fines. It does periodically examine FDIC-backed banks, and issues them a CRA compliance rating. A highly-rated bank must meet the financing needs of as many community members as possible, and must not discriminate against racial and ethnic groups or certain neighborhoods. However, a bank will not receive a high rating unless it is also maintains “safe and sound banking practices.”

11. No serious conservative economist would have ever approved of the CRA.

False. In March 2007, Federal Board Chairman Bernanke — no liberal he — noted that CRA has helped institutions discover and enter new markets that may have been previously under-served and ignored by insured depositories.

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