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Published: October 2008
Attacks on Community Reinvestment Act are misguided
Consumer Action joined in a letter defending the Community Reinvestment Act (CRA) from attacks that claim it is a part of the reason for the country's financial crisis.
Below is a summarized excerpt from the letter:
One example of regulatory failure is that many vital financial institutions – and the products they created and sold -- were not covered by meaningful regulation. Some market players clearly knew their actions were creating a potential market crisis. A Securities and Exchange Commission (SEC) Report recently found that in December of 2006 one analytical manager at a prominent credit rating agency wrote to another senior analytical manager to say “let’s hope we are all wealthy and retired by the time this house of cards falters.”
Improved regulation of the financial system – including brokers, lenders, appraisers, rating agencies and securitizers – was essential. If the Community Reinvestment Act – and other appropriate regulation -- had been applied to independent mortgage companies and other non-bank financial institutions, it is likely that our nation would not be confronted with a foreclosure crisis. Critics of the law conveniently ignore that about 75 percent of sub-prime loans were not covered by CRA. They also ignore the fact that most reckless and damaging subprime lending occurred between 2003 and 2007, long after CRA’s passage in 1977. CRA exams provide clear and strong incentives for banks to make safe and sound loans and penalize them for making loans that are unfair and abusive. CRA is an antidote, not a cause of the current crisis.
Accion USA | Chicago | New Jersey | New York | Center for American Progress | Center for Responsible Lending | CDFI Coalition | Consumer Federation of America | Dēmos: A Network for Ideas & Action | Enterprise Community Partners | Housing Assistance Council | Lawyers' Committee for Civil Rights Under Law | Leadership Conference on Civil Rights | Local Initiatives Support Corporation NAACP | National Association of Consumer Advocates | National Alliance of Community Economic Development Associations | National Community Reinvestment Coalition (NCRC) | National Consumer Law Center (on behalf of its low income clients) | National Council of La Raza | National Council of Negro Women | National Housing Conference | National Housing Institute | National Low Income Housing Coalition | National NeighborWorks Association | National Policy and Advocacy Council on Homelessness (NPACH) | National Rural Housing Coalition | National Urban League | Opportunity Finance Network | Rainbow PUSH Coalition
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