Media conservatives baselessly blame Community Reinvestment Act for foreclosure spike
Several conservatives in the media have recently blamed the Community Reinvestment Act (CRA) for the current financial crisis -- when, in fact, the CRA does not apply to institutions making what some experts have estimated to be the vast majority of troubled loans underlying the crisis. In a September 28 Boston Globe column, Jeff Jacoby asserted: "The pressure to make more loans to minorities (read: to borrowers with weak credit histories) became relentless. Congress passed the Community Reinvestment Act, empowering regulators to punish banks that failed to 'meet the credit needs' of 'low-income, minority, and distressed neighborhoods.' Lenders responded by loosening their underwriting standards and making increasingly shoddy loans." Likewise, during the September 25 edition of The Radio Factor with Bill O'Reilly, guest Jonathan Hoenig, a regular panelist on Fox News' Cashin' In and managing member of Capitalistpig Asset Management LLC, asserted that the CRA "makes banks give loans to bad risks." Similarly, during the September 25 edition of Fox News' The O'Reilly Factor, radio host Laura Ingraham said that "the problem here is government intervention in the free markets" and baselessly suggested that 1995 rules strengthening the CRA "pushed all these institutions to lend to minority communities, many were very risky loans." A September 25 Investor's Business Daily editorial claimed the CRA "forced banks to make many more subprime loans." Contrary to the accusation that the CRA is responsible for the current crisis, experts have said that approximately 80 percent of high-priced subprime loans were offered by financial institutions that are not subject to the CRA. Moreover, the president of the Federal Reserve Bank of San Francisco earlier this year said the CRA has actually increased the volume of responsible lending to low- and moderate-income households, as Center for American Progress senior fellow Robert Gordon noted in an American Prospect blog post.
