Questions and Observations

There are many, myself included, who believe the ’70s era Community Reinvestment Act was one of the key reasons for the financial meltdown we experienced since it required lending institutions to lend to unqualified borrowers.

Byron York reports that some Democrats in Congress refuse to acknowledge that and are now pushing to expand both the scope and power of the CRA:

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.

Barney Frank has never acknowledged the role of government in the collapse of the housing market. He’s refused to acknowledge the role of the CRA or Freddie Mac and Fanny Mae. And, apparently determined to act on his ignorance is now in the middle of trying to revive the program that was at least partly responsible for our financial woes. This makes absolutely no sense.

Republicans on the committee strongly oppose the plan. “Instead of looking to expand the number of institutions that must abide by Community Investment Act regulations,” California Rep. Ed Royce said in prepared opening remarks at today’s hearing, “I think we should reassess the role this and other government mandates played in the financial collapse and consider scaling it back.”

In private conversation, other Republicans were more emphatic. “There is clearly arguable evidence that the CRA is at the root of this financial meltdown,” says one GOP committee member. “So what do they do? They try to expand CRA.”

Republicans also made sure that the CRA’s connection to ACORN was made clear:

Republican critics point out that the Association of Community Organizations for Reform Now has used the CRA to pressure banks to pour money into ACORN and its affiliates, allowing ACORN to facilitate loans to clearly unqualified borrowers. Now, with ACORN under fire after a series of undercover videos showing ACORN workers in Baltimore, Washington DC, New York, and California openly encouraging prostitution, tax evasion, and other crimes, Republicans on the committee are citing the CRA-ACORN connection as yet another reason the Act should not be expanded.

ACORN is presently preparing to investigate itself. A clean bill of health is expected within a few weeks. In the meantime, the bill has 51 cosponsors among the most liberal members of Congress. As York points out, if Democrats in the House want to pass this they can. One wonders if the liberal caucus would be willing to trade the “public option” for passage of this expansion of the CRA and a promise treat ACORN kindly when the time comes. Of course, it would have to be approved by the Senate as well, and that’s a much more dicey prospect.

The point, of course, is this is sheer madness on the part of the Democrats in the House. The definition of insanity is doing the same thing over and over again and expecting different results. It appears that’s precisely what the liberal members of Congress are bound and determined to do.

~McQ