Don’t Blame the Community Reinvestment Act
I wish I could say that I was shocked when I saw a recent news story that quoted Republican Senate candidate Ron Johnson blaming the recession on the Community Reinvestment Act – a 1977 law that increased lending in communities where credit had traditionally been denied.
His argument is not new. But the argument is still wrong. At this point, nearly everyone knows that lax oversight of Wall Street fueled this recession.
Republicans in Congress have been wrongly pointing the finger at low-income, minority Americans and the CRA as cause for the subprime crisis and the recession for years.
If they took a closer look, they would know that it’s actually quite the opposite. CRA loans are safer. CRA banks have to prove that applicants can pay a loan back. But we got into this recession because regulators turned a blind eye and let banks give high-cost, high-interest loans to people who had no way to repay them.
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