It was an article in the San Antonio Express-News this past week by financial expert Scott Burns. The title was How History Is Likely To See Our Financial Crisis. Here are the main causes of the crisis which are elaborated on in the article:
1. The institutional reduction of lending standards forced by the Community Reinvestment Act.
2. The Taxpayer Relief Act of 1997, which made homeownership the best tax-free investment in America.
3. The 9/11 terrorist attack, which resulted in artificially low interest rates.
4. "Innovation" in mortgages to comply with the CRA -- innovation that also happened to be immensely profitable to everyone in the home finance food chain.
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Blaming the CRA??
"...
* More than 84% of the subprime mortgages in 2006 were issued by private lending institutions.
* Private firms made nearly 83% of the subprime loans to low- and moderate-income borrowers that year.
* Only one of the top 25 subprime lenders in 2006 was directly subject to the CRA;
* Only commercial banks and thrifts must follow CRA rules. The investment banks don't, nor did the now-bankrupt non-bank lenders such as New Century Financial Corp. and Ameriquest that underwrote most of the subprime loans.
* Mortgage brokers, who also weren't subject to federal regulation or the CRA, originated most of the subprime loans.
..."
http://bigpicture.typepad.com/comments/2008/10/private-sector.html
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