It's got to be a scary moment if you're a conservative. The economy is in a meltdown that can be directly traced to insufficient regulation. In other words, it's in meltdown because you suck at running it, and refused to listen to warnings that subprime loans required more oversight, Glass-Steagall made sense, and somebody should really be keeping an eye on these increasingly odd financial instruments and the obvious housing bubble that was feeding them. There's only one thing to do: Blame liberals.The new line we're hearing is that the financial meltdown was really the product of the Community Reinvestment Act, a piece of legislation from the late-70s that required federally-insured banks to lend throughout the areas from which they take deposits, including poor neighborhoods, which were being systematically excluded from credit. The legislation, by all accounts, worked. Now, however, conservatives are trying to argue that it's behind the crisis: If the CRA hadn't been pushing these banks to make all these unsafe loans, then the birds would still sing and Alan Greenspan could still start each morning by being anointed with the oil of the purest, youngest, olives.As Robert Gordon shows, however, this is crap. First, there's the timing. CRA came in 1977. The crisis came in 2007. Indeed, by 2004, the Bush administration had weakened the CRA -- and after that (though not, presumably, because of it), bubble lending really took off. Further, CRA only governs a certain class of federally insured banks. Problem is, half of the subprime loans came from mortgage companies with no CRA involvement at all. Another 25%-30% came from companies with very little CRA exposure. For those who left their abacus at home, that's 80% of the loans which were fully or largely outside CRA jurisdiction. More than that, the non-CRA mortgage firms made subprime loans at twice the rate of CRA-covered firms. Which basically leaves a stake in the heart of this particular theory. Indeed, until now, some conservatives have been moaning that no one is talking about the CRA part because it's so racially charged. Poppycock. It's just a false charge that's not worth talking about. As Gordon says, in one of my favorite kickers in some time, this "is not political correctness. It is correctness."(Photo used under Creative Commons license from Shaun Wong.) LIBERALS AND THE SH*TPILE.
It's got to be a scary moment if you're a conservative. The economy is in a meltdown that can be directly traced to insufficient regulation. In other words, it's in meltdown because you suck at running it, and refused to listen to warnings that subprime loans required more oversight, Glass-Steagall made sense, and somebody should really be keeping an eye on these increasingly odd financial instruments and the obvious housing bubble that was feeding them. There's only one thing to do: Blame liberals.The new line we're hearing is that the financial meltdown was really the product of the Community Reinvestment Act, a piece of legislation from the late-70s that required federally-insured banks to lend throughout the areas from which they take deposits, including poor neighborhoods, which were being systematically excluded from credit. The legislation, by all accounts, worked. Now, however, conservatives are trying to argue that it's behind the crisis: If the CRA hadn't been pushing these banks to make all these unsafe loans, then the birds would still sing and Alan Greenspan could still start each morning by being anointed with the oil of the purest, youngest, olives.As Robert Gordon shows, however, this is crap. First, there's the timing. CRA came in 1977. The crisis came in 2007. Indeed, by 2004, the Bush administration had weakened the CRA -- and after that (though not, presumably, because of it), bubble lending really took off. Further, CRA only governs a certain class of federally insured banks. Problem is, half of the subprime loans came from mortgage companies with no CRA involvement at all. Another 25%-30% came from companies with very little CRA exposure. For those who left their abacus at home, that's 80% of the loans which were fully or largely outside CRA jurisdiction. More than that, the non-CRA mortgage firms made subprime loans at twice the rate of CRA-covered firms. Which basically leaves a stake in the heart of this particular theory. Indeed, until now, some conservatives have been moaning that no one is talking about the CRA part because it's so racially charged. Poppycock. It's just a false charge that's not worth talking about. As Gordon says, in one of my favorite kickers in some time, this "is not political correctness. It is correctness."(Photo used under Creative Commons license from Shaun Wong.) 
