Talk:Community Reinvestment Act

Changes and edits

I'm glad to see that this page has been edited a fair amount since I last visited the article. Last time I visited this page I thought it was very strange to see a strong bias in the article, with statements written in bold/italics as if someone was trying to say that certain facts were more valid than others (under the "Relation to 2008 financial crisis" section).Arandomwikiguy (talk) 11:54, 2 July 2009 (UTC)

CRA as purported cause of the housing crisis.

I have made several changes: 1) fleshed out the commentary of FDIC chair Sheila Bair and the remarks of Fed Governor Grosznor who both relay extensive evidence against the proposition that the CRA was a significant cause of the housing crisis. Bair's remarks are unequivocal and deserved to be quoted. 2) removed an irrelevant citation from the section of people making the charge. I read the article, and it was almost entirely about blaming Freddie and Fannie for the crisis. It mentions the CRA once and presents no evidence (nor makes the claim) that it caused the housing crisis. 3) added 2 citations by Paul Krugman who has been especially vocal in refuting this idea. I trust he is "noteworthy" and his opinion on the matter is worth including.

In general I think the whole section is too long, relies too much on listing people on each side of this nonsensical debate, without stating more emphatically that this is not an idea taken seriously in economics. Aside from some opinions of right wing economists, there is no empirical data presented to make this case. It is simply an ungrounded hypothesis, plausible in the abstract but completely speculative. It turns into farce when all the available hard evidence shows the hypothesis to be false.--FNV (talk) 03:38, 18 February 2010 (UTC)

A few notes:

a.) Does anyone know where we could find the hard data/statistics that breaks down mortgage loan default rates among CRA-backed sub-prime loans vs non CRA-backed sub-prime loans or other non sub-prime loans? I've checked the Harvard database and it is pretty complex, I wouldn't mind seeing someone break down some numbers for the general population.

b.) I have personally found Paul Krugman's assertions with regards to current economics and politics to be of dubious worth. One reason the NYT and Obama administration love giving him so much exposure is because his column/articles always support increases in governmental power over the economy. Strangely enough this is not what he won the Nobel Prize for. His 55% quote is completely irrelevant considering he was talking about current loans a year after the initial market drop had occurred. Whether or not the CRA caused the collapse means the data we want would be from months leading up to collapse, not a year after when all markets were hurting from the overall economic collapse. Also he unfortunately cites data that is closed off to the general public (Wall Street Journal) which, if he were a Wikipedia contributor, would not be a valid reference.

c.) Opinions of people at the Federal Reserve and government agencies are suspect. Of course someone at working for the government is going to say that the current crisis is NOT the government's fault. Unless they give hard data to back up their claims then they should not be quoted in this article.

d.) Are the claims that the CRA didn't contribute to the collapse of 2008 contradicted by the earlier statements regarding CRA loans and Freddie Mac in the 3rd paragraph of the "Sound Practices and Profitability" section?

What we need to find is a good study showing whether or not CRA loans to low-income and other demographics had a higher instance of default than non-CRA loans. Right now the "Relation to 2008 Financial Crisis" is about 20% supporting the assertion that it helped contribute the crisis and 80% opposing which violates NPOV. Fatrb38 (talk) 06:27, 13 July 2010 (UTC)

I added many of the sources to this section. If you want data, one source that's better than most is the Traiger Hinckley study. Check it out and get back to me. The government does not seem to be lying when it says the empirical data does not support a connection. II | (t - c) 07:59, 13 July 2010 (UTC)

Mis-use of Wikipedia

I have become concerned of late about bias in Wikipedia. Frankly, for 10 years I've been impressed as to how well it worked, and has worked - and have been a repetitive, although not prolific or frequent contributor. In cases where my contributions weren't good they were deleted. In cases where they were good, they were improved. Everything as it should be.

I'm concerned that the NPOV and anti-bias rules can't be maintained, and have seen some troubling things lately (from moderators as well as well as normal contributors.) I don't know that any policy changes are appropriate. Wikipedia's weakness - that it can be changed by anyone, for whatever reason - is also it's strength, of course. Anyway, this youtube video is worth watching, for any concerned about the future of Wikipedia:

http://www.youtube.com/watch?v=TxgSubmiGt8

To the honest founders, moderators, editors, and contributors of Wikipedia - You've made a great resource, and shown me that such open collaboration can work. Thank You. —Preceding unsigned comment added by 97.89.22.141 (talk) 14:45, 25 June 2010 (UTC)

Agreed! It seems that this article has a large amount of bias toward proving that the CRA had nothing to do with the housing crisis, and none of the editors really seem interested in rebutting such arguments. The inference that ACORN or other low-income housing groups tried to prevent sub-prime lending (except, perhaps, where such sub-prime rates were higher than normal) is laughable, as encouraging low-income (which most often means sub-prime) housing is ACORN's and related groups' stated goal. —Preceding unsigned comment added by 71.11.175.42 (talk) 21:56, 15 July 2010 (UTC)

independent mortgage company statistics

I would like to add a citation relating to the following references.

He noted that approximately 50% of the subprime loans were made by independent mortgage companies that were not regulated by the CRA, and another 25% to 30% came from only partially CRA regulated bank subsidiaries and affiliates. Barr noted that institutions fully regulated by CRA made "perhaps one in four" sub-prime loans, and that "the worst and most widespread abuses occurred in the institutions with the least federal oversight".[114]

These quotes are accurate, but they imply that loans issued by independent mortgage companies are in no way related to the CRA. Independent mortgage companies arrange loans for CRA regulated banks. Hence, the regulations of the CRA would apply to these mortgages, as they would to any other, owned by CRA regulated banks, regardless of the fact that the loans originated at independent mortgage companies. To cite these statistics as somehow showing no link between the CRA and loans made by independent mortgage companies is misleading, and does not tell the whole story.

I am trying to add a comment that, at least, points out that CRA regulated banks fund loans from independent mortgage companies, and says nothing further. It would take more data to show whether or not the loans resulting in CRA credit for banks had a higher default or foreclosure rate. However, at the same time, it takes more than these statistics shown to unlink the CRA from loans made by independent mortgage companies.

This issue is independent of assigning causality of the financial crisis to the CRA. It simply gives these statistics more clarity. —Preceding unsigned comment added by Voightkampf (talk • contribs) 05:56, 22 August 2010 (UTC)

Actually, these quotes may be a logical fallacy, and should just be removed instead of clarified. If the point of these quotes is to show that sub-prime loans were largely not under the CRA, then this is a logical fallacy. This is equivalent to saying that, since member A is in set B, then it is not in set C, where A is a sub-prime loan, B the set of loans made by mortgage companies, and C is the set of loans regulated by the CRA. Clearly, one can construct a Venn diagram in which sets B and C intersect, and A is a member of both. The argument is only valid if you show or assume that no member of set B is a member of set C, i.e., that B and C do not intersect. In this case, for the point to be valid, it must be shown that these sub-prime loans made by independent mortgage companies were not arranged for or purchased by CRA regulated banks. No such assertion is made. As such, these statistics communicate very little meaning, and should probably be removed, instead of clarified. —Preceding unsigned comment added by Voightkampf (talk • contribs) 08:07, 22 August 2010 (UTC)

All well and good but Barr didn't absolve independent mortgage companies from affecting CRA ratings of host institutions rather points out the flaw in the regulatory structure that allowed the collusion to go unchecked. Your point implies that the primary motivation was not the over-exaggerated bundling and leveraging of mortgage backed securities by the majority of financial institutions in question here but the obtaining of an artificially inflated CRA rating by said institutions was the driving factor instead.

Before the National CRA Aggregate Report at FFEIC went down, it was fairly clear to see that CRA measured institutions, for the most part & even in key MSAs, were consistently no where near falling short of CRA compliance for a decade or more. Any collusion between key financial institutions and independent mortgage companies operating together with unsound business practices in play that happened to bring along it some padded or artificial CRA "points" was minor compared to the securitization and subsequent leveraging boon, if any benefit at all.

This entire CRA-is-to-blame talking-point is politically driven rather than fact based (various Housing and Community Development Acts over the years set the percentages for low and middle income lending; not the CRA) and, in my opinion, the connection between the obligatory CRA examination & rating as a major factor in this latest financial crisis is flimsy at best. It really has no place here, but such is the nature of community consensus I suppose <groan>. George Orwell III (talk) 08:54, 22 August 2010 (UTC)

My goal here is to discuss the presentation of these statistics specifically, whether or not they are presented in a clear way, and whether or not they should be clarified or removed. I do not think this should be a function of consensus as to what extent we think the CRA contributed to the housing crisis. If we're going to cite experts and paraphrase statistics and arguments for either side, we should present them in a clear context, or not at all. Saying that an expert says that the CRA is not to blame, and then citing the independent mortgage loan percentage of sub prime loans merely points out that many loans originate by mortgage companies and not at banks, nothing else. It is a statement that has no relevance to the CRA, since those loans were very possibly arranged for CRA regulated banks.

In fact, Countrywide Home Loans had a CRA program specifically oriented towards making loans for low-income people and selling them as mortgage backed securities to banks for CRA credit. Here's a quote from Countrywide's old website:

"Countrywide's goal is to meet the Six Hundred Billion Dollar challenge, funding $600 billion in home loans to minorities and lower-income borrowers, and to borrowers in lower-income communities, between 2001 and 2010. As of July 31, 2004, the company had funded nearly $301 billion toward this goal. The result of these efforts is an enormous pipeline of mortgages to low- and moderate-income buyers. With this pipeline, Countrywide Securities Corporation (CSC) can potentially help you meet your Community Reinvestment Act (CRA) goals by offering both whole loan and mortgage-backed securities that are eligible for CRA credit."

So, presenting statistics like this implying that mortgages originated by mortgage companies like Countrywide were never regulated by the CRA is fallacious and misleading. I would argue more in favor of their removal than their clarification, since these statistics give the wrong impression to readers who are unfamiliar with the relationship between mortgage companies, banks, and the CRA, and since there is no effort spent pointing this relationship out, along with these statistics. —Preceding unsigned comment added by 208.127.232.30 (talk) 21:09, 22 August 2010 (UTC)

Please keep in mind that any arguments made in the article MUST be attributable to a reliable source, synthesis and original arguments to justify a point are not allowed. It is also inappropriate to remove material that has been properly cited to reliable sources, based on synthesis and original arguments of the editor him/herself. LK (talk) 03:42, 23 August 2010 (UTC)

That is all well and good, Lawrencekhoo, but you keep removing any attempt to point out that mortgage company loans end up under the CRA if they are arranged for or owned by a CRA-regulated bank. This is material that is properly cited to a reliable source. Would you permit this factual addition that clarifies statistics already in this document under a different citation? It is a fact that mortgage loans from mortgage companies fall under the CRA when they are purchased either as a whole loan or a mortgage backed security by a CRA-regulated bank, and a critical one to understanding the independent mortgage loan statistics. It's not a fringe view that gets undue weight by mention with these statistics. Is there some format in which you would allow this additional fact? —Preceding unsigned comment added by 137.78.133.248 (talk) 20:33, 23 August 2010 (UTC)

I'm starting to agree with George Orwell III, and with earlier topics on balance. This section spends several paragraphs not only citing experts deemphasizing the role of the CRA with sub-prime mortgages, but actually delving into their arguments for why they don't think it matters. The alternative viewpoint is only mentioned in a few sentences, citing experts with no statistics or arguments. If one side of this issue is such a fringe view, or if we are only going to establish one side but not the other, perhaps we should just remove the entire section for balance issues. Or limit this section to one paragraph emphasizing influence of the CRA's influence, citing experts, and one paragraph deemphasizing the CRA, citing experts, with no statistical breakdown supporting either. See Wikipedia:Neutral point of view.

---

In this whole section, I see only one reliable secondary source which bears directly on the question of CRA's involvement in the crisis; namely, the BIS working paper, which concluded (in a footnote) that the CRA did not play a major role. Other than that, I see a lot of original research (people taking papers on other topics and asserting that they support or refute CRA as a cause of the crisis), plus an assortment of opinion pieces and unsupported statements from people whose econ credentials range from the impressive to the nonexistent. Ron Paul as an authority on economics? Really?

I propose whacking the whole section except for the introductory paragraph and the conclusions of the BIS paper. Then let anyone with additional reliable secondary sources, on either side, put them in. If there is a real debate going on in mainstream economics, then such sources ought not be hard to come by. On the other hand, if all available RSSes refute the claim of CRA being involved in the crisis, there is no need to give undue weight to the opposing view. Dausuul (talk) 16:03, 1 September 2010 (UTC)

New scrutiny

Recent ~14 May 2011 addition....

The Obama administration has increased scrutiny of the provision of credit to poor and African American neighbourhoods. Lenders have come under investigation for not operating in such areas, whether they have halted service there or have never operated in them before.^[78] Atlantic financial editor Daniel Indiviglio attributes increasing noncompliance with the CRA to tightening lending requirements.^[79]

The italics (my emphasis) gave me a clue to what may be the real driver behind this & it has not been reported yet as far as my searching for straight article goes.

The instance mentioned in the Atlantic piece referring to a Bloomberg report of a bank in St. Louis being suddenly in non-compliance most likely never bothered to adjust their practices in light of the post 2010_Census' LMI zone changes within the long established Census tracts leftover from the 2000_Census based ones. Checking old map and data for St' Louis against the 2010's latest did indeed show the shift -- indirectly altering the old "community-to-service" lines to a somewhat economically different one if not just geographically "redrawn".

I just haven't found a way to incorporate this dynamic of 'Census tract change oblivious banks' possibly contributing to the percieved increase in recent scrutiny without it being shot down as original research. Thought I'd mention it here so it has a chance of being supported with a credible citation some day. -- George Orwell III (talk) 05:19, 14 May 2011 (UTC)

Removal of Relation to 2008 financial crisis section

The "CRA caused the 2009 housing bubble" talking point has no credibility. Why is this conspiracy theory even included in the article? Ron Paul is not an economist, why is his opinion in the article? I understand wikipedia should avoid bias, but including this article is like reporting on the issue of big foot as follows: "Biologists say big foot is a myth, but others say he is real." In other words we are sacrificing accuracy for "fairness" and "sympathy" to those of a certain political persuasion. 99.169.66.28 (talk) 01:25, 28 December 2011 (UTC)