Yes Larry, that\’ll do it

The New Economics Foundation, a thinktank, has called for the government to adopt a US-style community reinvestment act, which would force the banks to offer services to poor communities in return for the capital injections they have received from the taxpayer.

Now I don\’t go as far as some, insisting that the Community Reinvestment Act was the sole and only cause of the sub prime mortgage fiasco. But I do think it was at least part of it. Banks had to, by law, lend to those who would not normally be considered credit worthy. They had to, in order to keep their banking licences, offer sub prime mortgages.

So the nef proposal is that in order to clean up our banking system after the mess of the sub prime mortgages we should deliberately insist that the banks must offer sub prime mortgages?

Not all that sensible really. But par for the course considering the source.

6 thoughts on “Yes Larry, that\’ll do it”

  1. Unless a law has been repealed, then yes of course it affects us today, regardless of when it was written.

  2. Andreas – yes indeed. The law was introduced by Carter as a piece of typical social engineering wishful thinking, then beefed up under Clinton by Frank and Dodd. It effectively created the sub-prime market; and to help that market function, its mortgages were guaranteed by the Federal agencies Freddie Mac and Fannie Mae and turned into securities. Thus did idiot leftists, in seeking to turn people who couldn’t afford home ownsership into home owners, manage to make our present difficulties much worse than they need have been.

  3. “So the Community Reinvestment Act of 1977 played a part in the 2007 mortgage fiasco?”

    In 1979 Mrs. Thatcher was elected. Suddenly, 30 years later, there was a financial crisis, all because she deregulated the banks, caused individualism, destroyed our manufacturing base [cont’d p.94]

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