Wednesday, September 17, 2008
The CRA caused the mortgage crisis meme
Judging by the results of Google News and Technorati searches, conservatives are pushing the "Community Reinvestment Act regulations caused the mortgage crisis" theory a lot harder than liberals are pushing back. Barry Ritholtz* made a derisive reference to the conservative position and linked to two liberal responses today, but those are five month old links. I can't find any current liberal responses to an idea that's been all over the conservative blogosphere (and probably in group emails) the last couple of days.
For criticisms of both the liberal and conservative takes on the current financial crisis, Time Magazine gives a typical Time Magazine assessment. Mike Volpe of The Provacateur gave criticisms of both sides last month, and followed up with a criticism of the conservative attack today:
I have no idea whether Volpe would describe himself as a conservative, but a look through his archives shows that he's clearly no liberal. However, it looks like you'll need to go back to the April archives of the big liberal blogs if you're looking for liberal answers to the talking points that you'll probably hear from from your conservative friends tomorrow or Friday.
*Not to imply that Ritholtz is a liberal. He's a frequent critic of the Bush administration and he clearly believes in some regulation, but I've never seen anything to indicate whether he's more of a moderate or a liberal.
For criticisms of both the liberal and conservative takes on the current financial crisis, Time Magazine gives a typical Time Magazine assessment. Mike Volpe of The Provacateur gave criticisms of both sides last month, and followed up with a criticism of the conservative attack today:
Now, first, I am no fan of the CRA, and I do believe that it had the effect that its attackers say it had, however, the effect is significantly more limited than any of the conservative partisan make it out to be. As such, while it may have had a corrossive effect on lending standards, this effect was a small blip compared to other factors.
...
To really prove that CRA was an insignificant factor, what one really needs to do is identify those areas most helped by the real estate boom and also those areas with the most foreclosures. If all these Conservatives are correct, then the real estate boom would have centered most of all in most of the poorest areas of the country and the current crisis in foreclosures would also be the same. In other words, the years 2003-2007 should have then seen an explosion in areas like Bedford Stuyvesant in New York, Englewood in Chicago, and Compton in California, and on the flip side those areas should be leading the pack for foreclosures now.
Instead, the biggest concentrations of foreclosures can be found in well to do areas like Boca Raton, Riverside County near San Diego, and of course Las Vegas. Does anyone really believe that there was an explosion of lending in Vegas because banks were attempting to meet some sort of quota of lending to poor folks? In fact, the real estate boom had a fairly negligible effect on the poorest areas of the country. In fact, the same areas Boca, Phoenix, Miami, and Vegas that boomed the most during the height of the real estate market are also now the ones suffering the most now that it is over.
I have no idea whether Volpe would describe himself as a conservative, but a look through his archives shows that he's clearly no liberal. However, it looks like you'll need to go back to the April archives of the big liberal blogs if you're looking for liberal answers to the talking points that you'll probably hear from from your conservative friends tomorrow or Friday.
*Not to imply that Ritholtz is a liberal. He's a frequent critic of the Bush administration and he clearly believes in some regulation, but I've never seen anything to indicate whether he's more of a moderate or a liberal.
Labels: Community Reinvestment Act, financial meltdown, liberal ostrich act, mortgage crisis
