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Chiefshrink
04-06-2009, 02:53 PM
who started the "domino effect" to our economic crisis.:mad: Dodd,Frank and Raines:shake::shake::shake::shake:

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MONEYNETDAILY
How banks were bullied into making bad loans
'Community activists' used pressure tactics to secure high-risk mortgages

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Posted: April 05, 2009
7:11 pm Eastern

© 2009 WorldNetDaily


Bruce Marks, head of the NACA

WASHINGTON – Using tools provided by the federal Community Reinvestment Act, community organizers led by a self-described "banking terrorist" applied bullying tactics to secure high-risk mortgages and to shake down lending institutions for billions of dollars – actions that likely contributed to the "mortgage meltdown" that triggered the worst economic crisis since the Great Depression.

That's the substance of a new report by the Capital Research Center on the Neighborhood Assistance Corporation of America headed by Bruce Marks.


"Time and again, NACA has combined the street tactics of protest and demonstration with public policy tools such as the Community Reinvestment Act to pressure banks into expanding their operations in poor neighborhoods," says the report authored by David Hogberg. "NACA typically extracts self-serving concessions from banks, forcing them to provide it with funds that it then uses to make mortgage loans to low-income borrowers. NACA rolls the fees it earns servicing these loans back into its campaign of bullying banks."

In 2007, the year before the crash, NACA obtained $10 billion in bank commitments for its own loan commitments with what the group admits were aggressive, hounding intimidation tactics.

"NACA has been accused of being overly aggressive and personal," explains the group's website. "NACA wears this as a badge of honor, leaving no stone unturned and often hounding CEOs from their shareholder meetings to their homes. The rationale is simple: lenders have a personal and often devastating impact on the lives of the people who they refuse to provide affordable credit to or take advantage of through predatory loans and scams."


NACA earned that reputation by first targeting Fleet Financial Group of New England, which was accused of lending money to private mortgage companies that, in turn, lent money at "loan shark rates." NACA filed lawsuits against Fleet and worked with local media on disparaging news coverage. NACA's "shock troops," known for wearing yellow shirts, disrupted speeches by bank officials, including one by CEO Terrence Murray at the Harvard Business School.

Four days later, Murray met with Marks and agreed to settle all suits for $350 million.

According to Capital Research Center, that money was used to launch the next attacks on First Union Bank of North Carolina, headed by Edward Crutchfield, dubbed "Fast Eddie" by NACA.

NACA attempted to crash a shareholders meeting and then began invading Crutchfield's personal life.

Again, the NACA website explains: "NACA hounded Fast Eddie at every turn. Thousands of postcards were sent to his home and neighbors, informing them of First Union's practices. NACA drafted the 'Fast Eddie Report,' which contained Crutchfield's personal information, and sent it to all of his neighbors and the neighbors of First Union's directors and top officers. NACA wanted Crutchfield to understand that he had a personal impact on people's lives by denying them credit, and thus his personal life would be affected as well."

News was spread that Crutchfield was having an affair with a subordinate. NACA began sending protesters to the school his child attended.

Crutchfield and First Union soon settled for a $150 million payoff.

NACA has received similar payoffs from NationsBank, Bank of America and Citigroup.

In 2007, Countrywide Bank was targeted. It quickly acquiesced to demands for a settlement that included a stipulation to restructure its borrowed troubled loans. A year later, Countrywide was insolvent – touching off a string of bank defaults and government bailouts that have cost taxpayers trillions.

"NACA could not operate as it has without the Community Reinvestment Act," says the CRC report. "The CRA is a federal law, first enacted in 1977, that banned the real estate practice of 'redlining' communities, singling out geographical areas where a bank would make no loans. To comply with the CRA, banks had to show that they did not discriminate in making loans in poor and black neighborhoods."

That compliance got tougher in 1995 when President Clinton upped the ante, forcing banks to demonstrate statistically they were making their quota of loans in low-income neighborhoods and encouraging community activist groups like NACA to file complaints against banks.

KC native
04-06-2009, 03:03 PM
This is a steaming pile of bullshit.

Kroszner: CRA & the Mortgage Crisis
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By Barry Ritholtz - December 3rd, 2008, 11:53AM

Sayeth the man:

“Some critics of the CRA contend that by encouraging banking institutions to help meet the credit needs of lower-income borrowers and areas, the law pushed banking institutions to undertake high-risk mortgage lending. We have not yet seen empirical evidence to support these claims, nor has it been our experience in implementing the law over the past 30 years that the CRA has contributed to the erosion of safe and sound lending practices. In the remainder of my remarks, I will discuss some of our experiences with the CRA. I will also discuss the findings of a recent analysis of mortgage-related data by Federal Reserve staff that runs counter to the charge that the CRA was at the root of, or otherwise contributed in any substantive way, to the current subprime crisis . . .

“This result undermines the assertion by critics of the potential for a substantial role for the CRA in the subprime crisis. In other words, the very small share of all higher-priced loan originations that can reasonably be attributed to the CRA makes it hard to imagine how this law could have contributed in any meaningful way to the current subprime crisis.”

Be sure to read the entire speech by the Fed Governor here. He discusses the result of an exhaustive data analysis performed by the various Fed Banks looking into the CRA issue and sub-prime

Of course, now that the election is over, the usual parade of reality challenged nitwits won’t be interested in any hard data or professional analyses. The full 233 page report is available here.

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Sources:
At the Confronting Concentrated Poverty Policy Forum
Governor Randall S. Kroszner
Board of Governors of the Federal Reserve System, December 3, 2008
http://www.federalreserve.gov/newsevents/speech/kroszner20081203a.htm

The Enduring Challenge of Concentrated Poverty in America
http://www.frbsf.org/cpreport/

Federal Reserve Director on the CRA
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By Barry Ritholtz - October 4th, 2008, 2:00PM

From the Federal Reserve:

"Neither the CRA nor its implementing regulation gives specific criteria for rating the performance of depository institutions. Rather, the law indicates that the evaluation process should accommodate an institution’s individual circumstances. Nor does the law require institutions to make high-risk loans that jeopardize their safety. To the contrary, the law makes it clear that an institution’s CRA activities should be undertaken in a safe and sound manner." (emphasis added)

What about mergers or acquisitions — did the CRA get in the way of that?

"Since 1988, there have been more than 13,500 applications for the formation, acquisition, or merger of bank holding companies or state-member banks reviewed by the Federal Reserve Board. Over this time, twenty-five applications have been denied, with eight of those failing to obtain Board approval involving unsatisfactory consumer protection or community reinvestment issues."

Wow, just 8 out of 13,500. That’s less than one tenth of 1%.

What about the methods of forcing compliance?

"The CRA is one of several laws enacted to ensure that consumers and communities have access to financial services and products regardless of location or demographics. Congress sought to achieve that goal not by imposing rigid, prescriptive rules but by charging regulators to use flexible standards that could change, as needed, over time."

Gee, this doesn’t sound too onerous; What was all the brouhaha about?

"The debate surrounding the passage of the CRA was contentious, with critics charging that the law would distort credit markets, create unnecessary regulatory burden, lead to unsound lending, and cause the governmental agencies charged with implementing the law to allocate credit. Partly in response to these concerns, the act adopted by Congress included little prescriptive detail."

What are the requirements of the CRA?

The CRA simply requires the Federal Reserve and the other federal financial supervisory agencies:

• to encourage federally insured depository institutions to help meet the credit needs of their entire communities, including low- and moderate-income areas, consistent with safe and sound operations;
• to assess their records of performance under the CRA during examinations; and
• to take those CRA records into account when evaluating proposals for expansion.

Hey, that sounds pretty flexible. What sort of discretion exists in applying the CRA:

The law gives the agencies considerable discretion and flexibility to fashion programs and procedures to carry out the purposes of the law, to issue implementing regulations that include measures of performance, and to modify those regulations in response to changing markets. This flexibility has contributed to CRA’s relevance and adaptability through times of rapid economic and financial change, and widely differing economic circumstances among neighborhoods.

Wow, this stuff makes the wingnuts and gasbags look pretty foolish. What’s your source for all this?

All quotes are come from the testimony of Sandra F. Braunstein, Director, Division of Consumer and Community Affairs of the Board of Governors of the Federal Reserve System, before the Committee on Financial Services, or from the Federal Reserve website.


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Source:
The Community Reinvestment Act
Sandra F. Braunstein, Director, Division of Consumer and Community Affairs
Before the Committee on Financial Services, U.S. House of Representatives
February 13, 2008
http://www.federalreserve.gov/newsevents/testimony/braunstein20080213a.htm

See also:
The Community Reinvestment Act: Its Evolution and New Challenges
Chairman Ben S. Bernanke
Community Affairs Research Conference, Washington, D.C. March 30, 2007
http://www.federalreserve.gov/newsevents/speech/Bernanke20070330a.htm

Community Reinvestment Act
http://www.federalreserve.gov/DCCA/CRA/default.htm

The Performance and Profitability of CRA-Related Lending
Robert B. Avery, Raphael W. Bostic, and Glenn B. Canner
Federal Reserve Bank of Cleveland, November, 2000
Economic Commentary
http://www.clevelandfed.org/research/commentary/2000/1100.htm

Amnorix
04-06-2009, 08:07 PM
ROFL ROFL ROFL They were out of power but it's ALL THE DEMOCRATS' FAULT!!!! ROFL

mlyonsd
04-06-2009, 08:09 PM
ROFL ROFL ROFL They were out of power but it's ALL THE DEMOCRATS' FAULT!!!! ROFL

But you'll admit they are part of the problem right?

HonestChieffan
04-06-2009, 08:27 PM
CRA is at the very root of all these issues but they will redirect the focus so Barney and Dodd and Pelosi dont get the stink on them.

KC native
04-06-2009, 08:32 PM
CRA is at the very root of all these issues but they will redirect the focus so Barney and Dodd and Pelosi dont get the stink on them.

:shake:No, the CRA had nothing to do with this crisis. Read my prior post and get your head out of your ass.

HonestChieffan
04-06-2009, 08:34 PM
:shake:No, the CRA had nothing to do with this crisis. Read my prior post and get your head out of your ass.

Your post is almost as full of crap as most of the others you post. Deny all you want but when banks are forced to do stupid things, bad things are the result and no politician is paying the price. This is a complete whitewash.

KC native
04-06-2009, 08:40 PM
Your post is almost as full of crap as most of the others you post. Deny all you want but when banks are forced to do stupid things, bad things are the result and no politician is paying the price. This is a complete whitewash.

This crisis was caused by leverage, low interest rates and lax regulation. CRA didn't make the banks and IB's go out and lever up. CRA didn't make them engage in derivatives contracts without posting any colleteral.

Here's another post to show you how wrong you are. Note where the foreclosures are happening (hint hint he writes about it).

More CRA Idiocy
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By Barry Ritholtz - December 11th, 2008, 11:05AM

Howard Husock has an exercise in cognitive dissonance in today’s NYT Op-Ed pages titled Housing Goals We Can’t Afford, and it begins:

“The national wave of home foreclosures, many concentrated in lower-income and minority neighborhoods, has created a strong temptation to find the villains responsible.”

What can you say about an Op-Ed whose very first sentence is a giant pile of steaming bullshit? That statement is demonstrably false. As the prior post on foreclosures shows, the concentration is mostly middle class and upper middle class white suburban neighborhoods.

California leads the nation in foreclosures. The state’s foreclosure activity was up 51% from a year ago. These are not CRA communities, they are what were hoped to be surburban bedroom communities east of the major cities (San Diego and L.A.)

Next up is Florida; The state’s foreclosure activity was still up 68 percent from November 2007. The enormous overbuilding of Condos, and not CRA, is to blame. These weren’t inner city loans to minorities, as Dan Gross pointed out, they were “WCI Communities — builder of highly amenitized condos in Florida (no subprime purchasers welcome there)” WCI filed for bankruptcy in August. “Very few of the tens of thousands of now-surplus condominiums in Miami were conceived to be marketed to subprime borrowers, or minorities—unless you count rich Venezuelans and Colombians as minorities.”

~~~

Let’s put some context around what the CRA is and isn’t.

In the 1960s and 70s, banks would redline neighborhoods. They would literally put a map on a wall, and with a red magic marker, draw a redline enveloping certain neighborhoods. If you lived within the redlined areas, regardless of your income, credit score, assets, debt servicing ability, if you were in the redlined area you could not qualify for a mortgage.

Although Redlining was made illegal by the Fair Housing Act of 1968, the practice still surreptitiously continued. The Community Reinvestment Act of 1977 was the next attempt to stop redlining. There were two main aspects of the CRA: First, it required banks to apply the same lending criteria in all communities. Credit Score, Loan-to-value, percentage of monthly take home, etc. had to be the same across different areas.

Second, the Community Reinvestment Act required banks to make good faith attempts to loan the money back to its own depositors. If you open up a branch in Harlem, you cannot suck up all the local business and residents’ cash, and then turn around and only lend it out to Tribeca condo buyers. You must make a fair attempt to loan the money locally. Banks have no obligation to open branches in Harlem, but if they did, they are required to at least try to lend the locals back their own money.

Note that there are no quotas, minimums or mandates. This is a very soft rating system.

~~~

The rest of Husock’s article is filled with the usual dissembling and half-truths. He mentions “in 1995 the Clinton administration added tough new regulations,” but omits any mentions that the Bush administration substantially watering down the act in 2004.

The only testimony adduced from the banking industry in the Op-Ed was“a compliance officer for a New Jersey bank wrote in a letter last month to American Banker.” That’s your inside proof? Meanwhile, since Bear Stearns collapsed in March, there has been a veritable parade of bankers, mortgage originators, lenders, fund managers, and investment banks CEOs all testifying in Washington D.C. about the causes of the crisis. By some strange coincidence, not a single one blamed the CRA (Dick Fuld, CEO of Lehman Brothers was even asked about it). Not a one.

And of course, vast numbers of sub-prime mortgages were written by non-CRA banks. Indeed, none of the 300+ mortgage originators that imploded were depository banks covered by the CRA.

This is a an intellectually silly argument from other perspectives also. Why was there no credit/housing meltdown from 1977 to 2005? Why did 30 other countries, none of which have are covered by the CRA, have a remarkably similar housing boom and bust to the USA? Husock’s arguments not only fail legally and factually, they also fail in terms of time and space . . .

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Source:
Housing Goals We Can’t Afford
HOWARD HUSOCK
NYT, December 10, 2008
http://www.nytimes.com/2008/12/11/opinion/11husock.html

Subprime Suspects
Daniel Gross
Slate, Tuesday, Oct. 7, 2008, at 2:08 PM ET
http://www.slate.com/id/2201641

HonestChieffan
04-06-2009, 09:13 PM
what a moron

KC native
04-06-2009, 09:16 PM
what a moron

Brilliant reply. I'll take that as you know that CRA didn't cause the crisis because you haven't refuted one thing I've posted that shows the CRA didn't cause this.

HonestChieffan
04-06-2009, 09:38 PM
your post is proof you have no understanding of the role of government in forced loans and banking. Drink that koolaide if you like but the facts are clear, the CRA was a major cause of the problems and congress ahs convinced you and others that more government is the solution while finding scapegoats to divert attention.

KC native
04-06-2009, 09:50 PM
your post is proof you have no understanding of the role of government in forced loans and banking. Drink that koolaide if you like but the facts are clear, the CRA was a major cause of the problems and congress ahs convinced you and others that more government is the solution while finding scapegoats to divert attention.

ROFLROFL Actually my post makes it very clear that I do know what role government has played in lending unlike you.

Jenson71
04-06-2009, 10:00 PM
Anything that keeps the hands of Wall Street clean (including the new Margaritville mixer with salsa component)

BucEyedPea
04-06-2009, 10:56 PM
Dodd,Franks and Raines have masters though

The Big Banks fund the Ds more. They feed each other. One's agenda gets fed, the other's greed. Perfect parasites.