Help. Need sources to debunk right wing friend.

I am in an email exchange about the causes of the financial crisis.
He's echoing the right wing talking point that defaulted home loans to minorities
due to government mandates are a major cause. I'm looking to shoot that down but good.
But I need some concrete info on the numbers.

Any sources to help me out?

Thanks!

Oh yeah, the lenders.

the credit default swaps which were the bets the banks would take out on lenders that they would foreclose in an effort to hedge their bets. Credit Default swaps mixed with short selling created a bad combination.

http://www.reuters.com/article/pressRelease/idUS135259+07-Jan-2008+BW20080107

Community Reinvestment Act May Have Deterred Risky Mortgage Lending

NEW YORK--(Business Wire)--A Traiger & Hinckley LLP study of 2006 mortgage loan data suggests
that the Community Reinvestment Act, a federal law that requires banks
to help serve the credit needs of their local communities, including
low- and moderate-income neighborhoods, deterred banks from engaging
in the kinds of risky lending practices that are provoking the
foreclosure crisis.

Compared to other lenders in their communities, banks making loans
in their CRA assessment areas (CRA Banks) were less likely to make a
high cost loan, charged less for the high cost loans they did make,
and were substantially more likely to eschew the secondary market and
retain high cost and other loans in portfolio.

and one I'd missed earlier.

Relaxing the rules allowed me to buy my house in 1996 with only a 15% down payment. It is now paid for entirely.

What they fail to realize is that poor folks hate debt. They know it's a trap because most of them have been preyed on by predatory lenders. They know the best thing to do with any debt is to pay the stinker off ASAP, even if it means doing without. They're also more likely to have experienced at least the threat of homelessness, so the mortgage payment always comes first.

The debt hogs are the good risks in the burbs who think nothing bad can ever happen to the right sort of people.

It's his premise, right? Ask him for some proof.

http://www.washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783.html

Elliot Spitzer and all (all!) other 49 state attorneys general realized what was going on was fraudulent/predatory lending and tried to shut it down in 2003. The Bush administration wouldn't let them and even sued Spitzer.

Democrat and Republican attorneys general tried to stop it.

My friend is a good guy. Just needs a little non-spin reality
to shake up his world.

I know I won't turn him away from the dark side. But I just can't
let his misinformation stand.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4096961

Send your friend a direct link so he doesn't see you found it at a Democratic website :evilgrin:

Did Liberals Cause the Sub-Prime Crisis?

Conservatives blame the housing crisis on a 1977 law that helps-low income people get mortgages. It's a useful story for them, but it isn't true.

The idea started on the outer precincts of the right. Thomas DiLorenzo, an economist who calls Ron Paul "the Jefferson of our time," wrote in September that the housing crisis is "the direct result of thirty years of government policy that has forced banks to make bad loans to un-creditworthy borrowers." The policy DiLorenzo decries is the 1977 Community Reinvestment Act, which requires banks to lend throughout the communities they serve.

snip

But CRA has always had critics, and they now suggest that the law went too far in encouraging banks to lend in struggling communities. Rhetoric aside, the argument turns on a simple question: In the current mortgage meltdown, did lenders approve bad loans to comply with CRA, or to make money?

The evidence strongly suggests the latter. First, consider timing. CRA was enacted in 1977. The sub-prime lending at the heart of the current crisis exploded a full quarter century later. In the mid-1990s, new CRA regulations and a wave of mergers led to a flurry of CRA activity, but, as noted by the New America Foundation's Ellen Seidman (and by Harvard's Joint Center), that activity "largely came to an end by 2001." In late 2004, the Bush administration announced plans to sharply weaken CRA regulations, pulling small and mid-sized banks out from under the law's toughest standards. Yet sub-prime lending continued, and even intensified -- at the very time when activity under CRA had slowed and the law had weakened.

Second, it is hard to blame CRA for the mortgage meltdown when CRA doesn't even apply to most of the loans that are behind it. As the University of Michigan's Michael Barr points out, half of sub-prime loans came from those mortgage companies beyond the reach of CRA. A further 25 to 30 percent came from bank subsidiaries and affiliates, which come under CRA to varying degrees but not as fully as banks themselves. (With affiliates, banks can choose whether to count the loans.) Perhaps one in four sub-prime loans were made by the institutions fully governed by CRA.

Most important, the lenders subject to CRA have engaged in less, not more, of the most dangerous lending. Janet Yellen, president of the San Francisco Federal Reserve, offers the killer statistic: Independent mortgage companies, which are not covered by CRA, made high-priced loans at more than twice the rate of the banks and thrifts. With this in mind, Yellen specifically rejects the "tendency to conflate the current problems in the sub-prime market with CRA-motivated lending.? CRA, Yellen says, "has increased the volume of responsible lending to low- and moderate-income households."

Yellen is hardly alone in concluding that the real problems came from the institutions beyond the reach of CRA. One of the only regulators who long ago saw the current crisis coming was the late Ned Gramlich, a former Fed governor. While Alan Greenspan was cheering the sub-prime boom, Gramlich warned of its risks and unsuccessfully pushed for greater supervision of bank affiliates. But Gramlich praised CRA, saying last year, "banks have made many low- and moderate-income mortgages to fulfill their CRA obligations, they have found default rates pleasantly low, and they generally charge low mortgages rates. Thirty years later, CRA has become very good business."

It's telling that, amid all the recent recriminations, even lenders have not fingered CRA. That's because CRA didn't bring about the reckless lending at the heart of the crisis. Just as sub-prime lending was exploding, CRA was losing force and relevance. And the worst offenders, the independent mortgage companies, were never subject to CRA -- or any federal regulator. Law didn't make them lend. The profit motive did.

http://www.prospect.org/cs/articles?article=did_liberals_cause_the_subprime_crisis

http://www.traigerlaw.com/publications/traiger_hinckley_llp_cra_foreclosure_study_1-7-08.pdf

- CRA loans constituted only 22.8% of all loans and 9.2% of high-cost loans
- CRA Banks were substantially less likely than other lenders to make the kinds of risky home purchase loans that helped fuel the foreclosure crisis.
- CRA loans were less likely to be foreclosed upon than other loans.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4090832&mesg_id=4090959