Sunday, November 02, 2008

Questions for CRA accusers

A lot of people have come up with a lot of theories about the economic meltdown and one of the nastier ones is that it's all the fault of the Democrats for trying to encourage mortages to non-traditional borrowers.

Now, there's no need to come up with additional theories to account for the problems. Greed and stupidity, coupled with a lack of regulation, is sufficient to explain the problem. But, that's not enough... these people need the Democrats to take the fall. After all, Republican ideals - deregulation, and letting the market take care of itself - are what caused the mess. Without a way to tie it to Democrats, it could make people call into question the wisdom of letting greed run rampant.

But is it a fair accusation? Is it reasonable to try to tie efforts like the CRA to the meltdown?

Well, it can be hard to say. Government regulations are complicated, and it's entirely possible that some regulation or another ended up having unintended consequences.

But here's the question... what regulation is supposed to have caused this massive problem? And why wasn't anyone complaining about it when it happened?

I don't mean "why didn't anyone complain about the CRA?" because lots of folks did. I mean, what regulation caused mortgage lenders to have to make loans that they couldn't sohw were good loans? Because, in the end, that's the real question, right?

Either one of two things happened. Either people made a lot of stupid loans because they were stupid and greedy, or they made a lot of stupid loans because there was something that forced them to do so, against their better judgment.

So, which was it?

This is the question you should put to people who try to blame the CRA for this meltdown.

What specific regulation said "make stupid loans"?

Make them bring up the regulations in question, and then we can actually have a reasonable discussion about this.

Or, tell them to admit they don't have anything, and tell them to stop whining about the CRA and its effects on the meltdown.

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