US govt created subprime crisis 30 yrs ago
Why US banks lent so much loans for so many years
to sub standard borrowers?
Our first reaction is the banks wants to have more biz .
I find a new explantion related The Community Reinvestment Act and
quite credible.Also the banks are also threatened by Community
Org
to lend or donate money.They just rob the banks in a legal
way!!
The so called community org can block the banks
operations,like
open new branch,merge and acquisition,etc
The US authority also can fine the banks if they cant meet the
loans
target in the designated area!!
US pass The
Community Reinvestment Act (or CRA, Pub.L. 95-128, title VIII, 91
Stat. 1147, 12 U.S.C. § 2901 et seq.) is a United States federal
law that
requires banks and thrifts to offer credit throughout their entire
market area and prohibits them from targeting only wealthier
neighborhoods with their services, a practice known as "redlining."
The purpose of the CRA is to provide credit, including home
ownership opportunities to underserved populations and commercial
loans to small businesses.
The CRA was passed into law by the U.S. Congress in 1977 as a
result of national grassroots pressure for affordable housing, and
despite considerable opposition from the mainstream banking
community. Only one banker, Ron Grzywinski from ShoreBank in
Chicago, testified in favor of the act. [1]
The CRA mandates that each banking institution be evaluated to
determine if it has met the credit needs of its entire community.
That record is taken into account when the federal government
considers an institution's application for deposit facilities,
including mergers and acquisitions. The CRA is enforced by the
financial regulators (FDIC, OCC, OTS, and FRB).
In 1995, as a result of interest from President Clinton's
administration, the implementing regulations for the CRA were
strengthened by focusing the financial regulators' attention on
institutions' performance in helping to meet community credit
needs. These changes were very controversial and as a result, the
regulators agreed to revisit the rule after it had been fully
implemented for five years. Thus in 2002, the regulators opened up
the regulation for review and potential revision.
2.One of the link in wikipedia provide a very good
anaylsis
The
Government-Created Subprime Mortgage Meltdown
by Thomas J. DiLorenzo
... So-called "community groups" like ACORN benefit themselves
from the CRA through a process that sounds like legalized
extortion. The CRA is enforced by four federal government
bureaucracies: the Fed, the Comptroller of the Currency, the Office
of Thrift Supervision, and the Federal Deposit Insurance
Corporation. The law is set up so that any bank merger, branch
expansion, or new branch creation can be postponed or prohibited by
any of these four bureaucracies if a CRA "protest" is issued by a
"community group." This can cost banks great sums of money, and the
"community groups" understand this perfectly well. It is their
leverage. They use this leverage to get the banks to give them
millions of dollars as well as promising to make a certain amount
of bad loans in their communities.
A man named Bruce Marks became quite notorious during the last
decade for pressuring banks to earmark literally billions of
dollars to his organization, the "Neighborhood Assistance
Corporation of America." He once boasted to the New York Times that
he had "won" loan commitments totaling $3.8 billion from Bank of
America, First Union Corporation, and the Fleet Financial Group.
And that is just one "community group" operating in one city
Boston....
3.HSBC
US branch settled a class law litigation with
ACORN
ACORN got the ransom!!
...In connection with the proposed settlement, Household has
agreed to provide funding over a three-year period for
ACORN-sponsored financial counseling and literacy programs...
4.Justice in US
Rubbish.This is the failure of voting system.The community
org
is quite well organised,like Mafia.They can win offices in
community
and have more political power!!
God save America.
