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Rico,

I too have seen the email mentioned in Snopes -- I knew it was exaggerated as to the extent and role of the former execs in the Obama campaign from my own reading on the subject. This should come as no surprise to anyone -- as most anonymous emails (especially about politics) circulating the internet are of often limited factual validity.

However I did not base my comment in my post on the exaggerrated email but rather on my understanding of the facts, which as the Snopes analysis acknowledges, did have Raines and Johnson advising/serving the campaign in some capacity. Particularly Johnson, which as Snopes notes, was picked by Obama to be one of 3 people vetting his VP choice -- clearly an important indicator that Johnson was an important advisor/friend/whatever to Obama at that time at least.

I would add that some of the Snopes "facts" are based on denials from the Obama campaign itself which logically would try to minimize the role/contacts these characters had with Obama. Raines role was seemingly more minimal but the history of Fannie donations to Obama over the years (2nd most of any Senator despite only being in the Senate for 4 years) suggests sone contact did exist between Obama and Fannie's disgraced leadership.

Brian

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Before I turn to potential interventions, I want to make one final point.  There has been a tendency to conflate the current problems in the subprime market with CRA-motivated lending, or with lending to low-income families in general.  I believe it is very important to make a distinction between the two. Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans,16 and studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households.

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No, Larry, CRA Didn’t Cause the Sub-Prime Mess
Ellen Seidman -
April 15, 2008 - 9:55am

It has lately become fashionable for conservative pundits (Larry Kudlow, George Will) and disgruntled ex-bankers (Vernon Hill, for example, in his March 7 American Banker editorial) to blame the current credit crisis on the Community Reinvestment Act. This is patent nonsense. The sub-prime debacle has many causes, including greed, lack of and ineffective regulation, failures of risk assessment and management, and misplaced optimism. But CRA is not to blame.

First, the timing is all wrong. CRA was enacted in 1977, its companion disclosure statute, the Home Mortgage Disclosure Act (HMDA) in 1975. While many of us warned against bad subprime lending before the turn of the millennium, the massive breakdown of underwriting and extension of risky products far down the income scale-without bothering to even check on income-was primarily a post-2003 phenomenon. To blame a statute enacted in 1977 for something that happened 25 years later takes a fair amount of chutzpah.

It's even more outrageous because of the good CRA clearly did in between. The 1990s were the heyday of CRA enforcement-for a variety of reasons including the raft of mergers and acquisitions that followed the 1994 Riegle-Neal Interstate Banking and Branching Act, increased scrutiny of lending practices by the media and activism by housing advocacy groups and tougher enforcement by the Clinton Administration.That period saw increased home mortgage lending to lower income households and in lower income communities by the banks and thrifts covered by CRA, and a steady increase in the homeownership rate, especially for lower income and minority families. (See The Joint Center for Housing Studies). In addition, there was significant investment in affordable rental housing, community facilities and broader community economic development, directly by banks and thrifts earning investment credit under CRA or indirectly through bank investment in Community Development Financial Institutions and other community-based organizations.

New research by Ingrid Gould Ellen and Katherine O'Regan of NYUWagner, presented at a conference sponsored by the Philadelphia Federal Reserve Bank, convincingly demonstrates that property values went up dramatically in low and very low income urban census tracts during the 1990s, reversing severe declines during the prior two decades. While Ellen and O'Regan point out that this does not necessarily mean that everyone in those communities benefited, relating the improvement in home values in distressed communities to the effects of a statute designed to increase access to mortgage credit in those communities, during a period when the statute was vigorously enforced, is a reasonable connection.

Second, CRA does not either encourage or condone bad lending. Bank regulators were decrying bad subprime lending before the turn of the millennium (see Interagency Guidance on Subprime Lending), and warning the CRA-covered institutions we regulated that badly underwritten subprime products that ignored consumer protections were not acceptable. Lenders not subject to CRA did not receive similar warnings.And we also explained to those we regulated how to serve lower income communities and borrowers in a manner that was good for the borrower, good for the bank, and earned CRA credit.

For example, in October 2000, when I spoke to the National Association of Affordable Housing Lenders, a group of CRA-covered lenders, I said, "key to successful community reinvestment activity is being a responsible lender. Being responsible means making loans on responsible terms to people who can afford to pay them back, and making certain borrowers both understand the terms of the loan and have the opportunity to get the best terms available given their credit and financial position. But it also means expanding both the market for and affordability of loan products. It means working with customers to make them more bankable, helping families find the loan that is right for them, and investing in their success and yours by supporting organizations that assist you by counseling these individuals on the front and the back end of a loan."

CRA enforcement became a lower priority for bank regulators after 2001. My successor at the Office of Thrift Supervision, in fact, led an effort-eventually thwarted-to unilaterally loosen CRA regulations for institutions with more than $1 billion in assets. See 70 Fed. Reg. 10023. Nevertheless, CRA regulations were eased more generally in 2005. See 70 Fed. Reg. 44256.

The years that coincided with reduced CRA enforcement are also the years when CRA-covered entities wandered deeper into "higher priced loans," a category that includes, but is not limited to, "exploding ARMs" and other particularly pernicious kinds of loans. Thanks to the valiant efforts of late Fed Governor Ned Gramlich, starting in 2004 we have data about "higher priced loans." In that year, bank, thrifts and their subsidiaries-the entities covered by CRA-made about 37% of high cost loans. By 2006, the bank, thrift and subsidiary percentage was up to 40.9%. That a lack of interest in CRA enforcement coincided with CRA-covered entities getting into higher priced lending does not seem to me an argument for less CRA enforcement. Rather, it's an argument for better enforcement of a statute that, when well enforced, had proven its worth in helping both borrowers and communities.

Finally, it is nevertheless the case that CRA-covered lenders are not the source of the problem. One of CRA's major failings, in fact, is that it only applies to banks and thrifts. Remember all the investment banks who demanded product and then sliced and diced loans until it was impossible to understand their quality?They're not covered. Neither are the independent mortgage banks, the kinds of firms that have gone bankrupt or nearly so because of their abysmal lending practices, who regularly made about 50% of the high cost loans. Bank affiliates, another uncovered group, made about 12% of the high cost loans.

Janet Yellin, President and CEO of the Federal Reserve Bank of San Francisco recently made this point, saying "Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans, and studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households." And a recent study by Traiger & Hinckley LLP (See also the addendum).

CRA is not perfect. It doesn't cover a substantial portion of the financial services landscape. It has become complex, and the primary focus is on numbers of loans, with less attention to the quality of those loans. Asset-building depository and other services are given short shrift. And banks and thrifts have been allowed to "count" loans made by affiliates that are not subject to effective regulatory scrutiny. Governor Gramlich was right when he said that these entities-like the independent mortgage bankers-should be subject to far greater regulatory scrutiny, for many reasons. Certainly banks should not be allowed to count loans made by these affiliates for CRA purposes without such scrutiny.

But these are not reasons to repeal CRA or blame it for a mess caused primarily by those not subject to its reach during a period when even those under its umbrella were not encouraged to take it seriously. Rather, our challenge is to respond to the ongoing credit crisis in part by modernizing CRA, expanding its reach and making it even more effective than it was in the 1990s.

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Don't forget immediatley after 911, George Bush encouraged people to go the Malls, spend money take each day as it comes. Enjoy Life spend spend.. spend. So lenders were trying to encourage the economy by having everyone out working to produce the goods we were to buy. The more we bought the more was spent, the more goods and services Americans produced .
If you got in over your head,, take out another loan, Pay the old loan off on the new credit card..

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Funny how the article doesn't mention that in demanding enforcement of the CRA they are only demanding that banks abide by US federal law, that housing advocacy groups including ACORN objected to subprime lending practices as predatory, and that these groups have been warning of the dangers of subprime lending since the early 90s.

The problem isn't that banks were pressured to loan to low-income people, or that people of low-income deserve the right to buy a home.  People of low income do deserve the right to own property rather than throwing money away on rentals.  The problem is that people have a dream home in their mind, and that these predatory lenders steered these people toward getting more home than they could afford./blockquote]

ACORN is in fact, the cause of a very large part of this whole mess.  Don't forget that they've been feeding at the government trough for 30 years.  Perhaps you've heard of the voting fraud controversy that is rapidly spreading across the whole country?  100% due to ACORN, and they are repeating a pattern that has occurred every election cycle since they went into business.  They worked with people like Barney Frank and Chris Dodd, among others, to push these sub-prime loans to low income blacks and other minority groups, knowing full well that most of them would default, and covered their butts by coercing Fannie Mae and Freddie Mac into covering all that bad paper.  Also, don't forget that Obama was an ACORN lawyer in his early career in Chicago, and that his "community organizing" was in reality supervising ACORN workers doing their dirty work.

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Don't forget immediatley after 911, George Bush encouraged people to go the Malls, spend money take each day as it comes. Enjoy Life spend spend.. spend. So lenders were trying to encourage the economy by having everyone out working to produce the goods we were to buy. The more we bought the more was spent, the more goods and services Americans produced .
If you got in over your head,, take out another loan, Pay the old loan off on the new credit card..

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Snark wrote:
I like a few of the ideas that each has and loathe a whole lot more.