I posted a reply on Facebook to a discussion on the CRA (Community Reinvestment Act) and how I felt that a certain article that was mentioned in a previous post almost dismissed the fact that the CRA was ever to blame at all. I was commenting on a link http://krugman.blogs.nytimes.com/2009/11/10/armey-of-ignorance/ that I read it was basically telling me that Dick Armey was ignorant. To me the Armey article was a little inflammatory, but I think it was meant to be just that.
This is my reply:
Krugman said "The vast bulk of subprime lending came from institutions not subject to the CRA." The lenders thought they had better investments and maybe had to offset the projected losses FROM the CRA. Krugman is doing a HUGE disservice by not giving the CRA its due share of the blame. In fact, he sounds like a NYTimes liberal and I would imagine that he would not blame CRA whatsoever...
Let me sum my point with, a snowball comes down the mountain at an ever increasing speed. It picks up more snow and debris along the way and becomes much bigger and much more dangerous. Once it hits the town at the bottom of the mountain and wipes part of the town out, it is MUCH more devastating than the original snowball.
Was CRA responsible for the whole mess? NO. CRA was the snowball in the beginning and partially fueled by Barack and ACORN's strong-arming and the government (Example - Barney Frank). IT was also partially fueled by wall-street because they saw that Sallie Mae and Freddie Mac were buying up 2 billion in loans and that was considered safe. Housing markets rose, people that were getting the CRA and non-CRA loans, but couldn't pay them and the snowball stopped with the devastation of the markets as we know it. Because of the deregulation and lack of oversight (GOV'T is still to blame), people started defaulting left and right into something that they couldn't pay for.
Barak and his redistribution of wealth started back in the 70's and it hasn't stopped. In addition, the CRA and the lack of govt. intervention was a huge reason this economy failed. I believe it was the main reason it failed. Pointing fingers at wall street and not the government is like pointing a finger at debris in the snowball and saying the debris did this and discounting all of the snow and velocity in which the snowball had in making its final impact.
End of reply.
I tried to put the market meltdown in the best synopsis I could come up with in the shortest amount of time. In my mind, this whole debacle started when lenders were forced to make loans to people who couldn't pay them back. And why would the government give incentives to do this?
We need to stop this insanity. We need the oversight from the Federal government with minimal intrusion. States should be in charge of who loans to whom and the feds should keep an eye on the state books with regular and surprise audits. There should be guidelines that are approved that mitigate the problems we faced into loaning so much to the subprime market. The fairness should be considered in who can pay back the loan and no other factors, like some others would have us believe. I also don't think that sub-prime loans should be eliminated. If you do the due diligence of any loan and it is in the best interest of the lender and borrower and follows the guidelines that are introduced, I am for the freedom of having such a system.