jdl51

Buffett's Betrayal

"The main reason the system was about to collapse was that liberals (through the Community ReInvestment Act) thought it was a good idea to loan money to people who can't afford to pay it back, to increase home ownership."

The CRA was passed to stop banks from redlining neighborhoods. If an individual in a certain neighborhood was qualified for a home loan, the banks that serviced that area, taking deposits, checking, were obligated to also lend to qualified borrowers in that area. Previously banks were taking these folks money but weren't lending to them. There is nothing in the CRA that "forced" banks to lend to anyone that walked in the door regardless of qualifications. The banking industry and their lapdogs in congress would have screamed bloody murder if that was in the bill and would have done everything in their power to stop it. The banks and the securitizers are the ones who came up with the brilliant idea to lend to anyone regardless of qualifications. They could just push those securitized loans out the door and peddle them to an unsuspecting public, thanks to the rating agencies, and then turn around and make more loans, fees, etc. The previous administration with its non existent watchdog policies, its no regulation/deregulatio... market is everything policies allowed that system to grow out of control, causing the near total collapse of the financial system. I thought this was common knowledge.