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The Community Reinvestment Act: Soon to be Worse than Ever?

By Doug Bandow on 9.16.09 @ 4:58PM

Not content with wrecking the housing industry by forcing increased lending to those unable to pay back their mortgages, the Left wants to give it another try.  Fannie Mae and Freddie Mac are still around, of course, begging for new bail-outs as they try to reinflate the housing bubble.  And then there's the Community Reinvestment Act, which was used as a form of financial affirmative action, forcing banks to provide mortgages to people who did not meet normal lending standards.  Alas, more than a few couldn't pay back their loans, leading to charges of ... predatory lending!

But the Left has learned nothing, and wants to expand the CRA to every lending institution not yet covered.  The results would be predictable, alas.  Another crisis to be blamed on "unfettered" capitalism!

Reports Byron York:

A number of experts believe that aggressive enforcement of the 1970s-era Community Reinvestment Act contributed to the mortgage meltdown, and thus to the greater financial crisis, by requiring financial institutions to lend to unqualified borrowers. Now, the Democratic majority in the House of Representatives is responding to that situation by proposing to expand the scope and power of the Community Reinvestment Act.

This morning House Financial Services Committee chairman Rep. Barney Frank held a hearing on H.R. 1479, the "Community Reinvestment Modernization Act of 2009." The bill's purpose is "to close the wealth gap in the United States" by increasing "home ownership and small business ownership for low- and moderate-income borrowers and persons of color." It would extend CRA's strict lending requirements to non-bank institutions like credit unions, insurance companies, and mortgage lenders. It would also make CRA more explicitly race-based by requiring CRA standards to be applied to minorities, regardless of income, going beyond earlier requirements that applied solely to low- and moderate-income areas.

Of course, the one thing that could end up missing from the picture is ACORN, under fire for promoting prostitution and tax evasion by those seeking the organization's counsel.  The CRA doesn't make much sense if ACORN isn't around to lead the resulting financial shake-down.