How to Get More Loans for Low-Income Persons
Regarding my last post, I would like to know how the federal government plans to use the proposed Consumer Financial Protection Agency to accomplish this Whitehouse stated goal:
“A critical part of the CFPA’s mission should be to promote access to financial services, especially for households and communities that traditionally have had limited access. … Rigorous application of the Community Reinvestment Act (CRA) should be a core function of the CFPA. “
In other words, lots of loans need to be made in poor neighborhoods that would not otherwise be made. Now since people are poor in these neighborhoods, on the average they are going to have far less money for down payments, worse credit, and less ability to make payments after they get the loans. So how is this to be solved? The only results-oriented path forward is to relax the amounts needed for downpayments, overlook poor credit scores, downplay the likelihood that payments will not be made on time, and reduce interest rates to make payments lower. But wait - haven’t we been here before?
It is appropriate that banks are monitored to see that they are not discriminating on race regarding loans, such as in poor neighborhoods. But you can be sure that activist groups empowered by the CRA are not going to be satisfied with that. I mean - then what would they have left to do? The goal is not to be simply watchdogs to prevent discrimination. The goal is to get more loans made. But how is that done? See the prior paragraph.
Update: For a highly prescient article about the CRA, by Howard Husock, in the Winter 2000 edition of City Journal, see here. And how can all of this be ignored by the mainstream media? They seem to only repeat the Democrat’s talking points.
June 23rd, 2009 at 10:44 am
Howard said all it would take is a republican president to get rid of the CRA. Whoops!!! I guess it just took a republican president to make it even worse. He had a very good article but it would have been even better if he didn’t just criticize the democrats and hold up the republicans as never doing wrong. We obviously found out after this article that the republicans can be every bit as bad as the democrats when they are in power. Both parties at least in the leadership positions are pretty much one in the same. All they want is more power and control at the expense of our freedoms and wallets.