Smalltownbanker

Larry Kudlow is Dead Wrong: CRA Didn't Start the Meltdown

CRA is flawed but the intent was to make sure banks offered loans wherever they were willing to take deposits. CRA did not cause our mortgage problems but may have been a minor contributing factor. Most CRA inspired bank lending programs did not have teaser rates and pre-payment penalties, in fact I have never seen one that did.
What CRA did was create an environment where the banks were forced to ignore sound credit policies in order to meet government quotas for lending in certain areas. The vast majority of Sub-prime loans were originated by firms who are not even subject to CRA. Everyone wants to place blame for what happened. The sad fact is that it belongs to the traders, the originators, the underwriters, the policy makers, the borrowers, the realtors, the builders, the GSE's, Congress, the Fed, the regulators, the States but mostly the individuals who signed loans they could not afford.