Subprime Coverup

March 4, 2010 at 13:48 (Economy, General Stupidity, News)

What else does anyone expect? They won’t learn until we either fold as a country and start from scratch or the left seizes control, which they’re working on now.

Financial Crisis: As Congress crafts new banking rules to beef up the Community Reinvestment Act, the panel it picked to probe the subprime mess is discounting CRA’s role in it. How convenient.

The “bipartisan” Financial Crisis Inquiry Commission kicked off its hearings this year by pillorying Wall Street. It also vowed to investigate the impact of housing policy. So far all it’s done is farm out a study on the subject to a Berkeley economist pal of Phil Angelides, the commission’s Democrat chairman.

Predictably, his 25-page paper concludes that the Community Reinvestment Act had no real role in the crisis, even though the anti-bank redlining regulation was strengthened and enforced like never before starting in 1995.

“I find no evidence that CRA incentives played a significant role in expanding high-risk lending during the housing bubble,” said UC-Berkeley economist Dwight Jaffee.

What about the affordable-housing quotas HUD slapped on Fannie Mae and Freddie Mac? They were “secondary to profits” as a factor motivating their investments in high-risk mortgages, Jaffee advised the panel, which will use his study as a baseline for discussion and findings.

That’s a shame. His analysis is riddled with flaws and suspicious omissions.

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