Kim-Christian Nielsen Posted October 14, 2016 Posted October 14, 2016 Stefan has on multiple occasions mentioned that before the 07 financial crash laws were set in place that forced banks to lend money to people who couldn't afford it. My google skills are up to par. I can't find anything on this. Does anyone have some names of politicians, laws etc? I tried looking in the different sources linked to on the shows but I can't seem to find this out. I'd appriciate a hand. Thanks in advance!
dayna j. Posted October 14, 2016 Posted October 14, 2016 https://en.wikipedia.org/wiki/Community_Reinvestment_Act http://www.forbes.com/2008/07/18/fannie-freddie-regulation-oped-cx_yb_0718brook.html From forbes link above: "The CRA (community reinvestment act) forces banks to make loans in poor communities, loans that banks may otherwise reject as financially unsound. Under the CRA, banks must convince a set of bureaucracies that they are not engaging in discrimination, a charge that the act encourages any CRA-recognized community group to bring forward. Otherwise, any merger or expansion the banks attempt will likely be denied. But what counts as discrimination? According to one enforcement agency, “discrimination exists when a lender’s underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants.” Note that these “arbitrary or outdated criteria” include most of the essentials of responsible lending: income level, income verification, credit history and savings history–the very factors lenders are now being criticized for ignoring. The government has promoted bad loans not just through the stick of the CRA but through the carrot of Fannie Mae and Freddie Mac, which purchase, securitize and guarantee loans made by lenders and whose debt is itself implicitly guaranteed by the federal government. This setup created an easy, artificial profit opportunity for lenders to wrap up bundles of subprime loans and sell them to a government-backed buyer whose primary mandate was to “promote homeownership,” not to apply sound lending standards."
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