Colorado Spring Gazette: OPINION
The CRA was formed during the Carter era, expanded under President Clinton and even championed by President George W. Bush. Politicians saw this act – which rated and rewarded banks based on their efforts to hand out loans in poor and minority neighborhoods – as a means to expand the dream of home ownership. That’s a worthy goal, but the end result was the obliteration of the market rules that assured that loans were given only to those who could afford to pay them.
These loosened standards benefited the real estate industry for a short period. Every Ponzi scheme needs new buyers to keep the system going. And so the housing bubble got inflated to absurd levels. When the bubble burst, lenders lost huge piles of cash.
“Banks have been placed in a Catch-22 situation by the CRA: If they comply, they know they will have to suffer from more loan defaults,” explained Tom DiLorenzo, a Loyola College of Maryland economics professor writing on lewrockwell.com. “If they don’t comply, they face financial penalties, and, worse yet, their business plans for mergers, branch expansions, etc. can be blocked by CRA protesters, which can cost a large corporation like Bank of America billions of dollars. Like most businesses, they have largely buckled under and have surrendered to their bureaucratic masters.”
Making these obvious points is not racist. Mr. Frank should be ashamed of himself. The nation needs a wide-ranging debate, not efforts to shut down discussion.