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The loosening of loan standards played a significant role in creating an environment in which the hedge funds, banks, and insurance companies exploited.
by joejerryronnie 7y ago
The loosening of loan standards played a significant role in creating an environment in which the hedge funds, banks, and insurance companies exploited.
- MaupitiBlue 7y agoI think his point was that the loosening of standards wasn’t because of anyone had a good heart, or because of the reinvestment act, it was simply the shortsighted greed of the lenders.
- User23 7y agoIt was a classic accounting control fraud, just like the S&L scandal. William Black wrote the book on them if you want to learn more.
- pnutjam 7y agoAnother myth is that the Community Reinvestment Act created the crisis. That's because it pushed banks to lend more to poor neighborhoods. That was its mandate when it was created in 1977. In 1989, FIRREA strengthened the CRA by publicizing banks' lending records. It prohibited them from expanding if they didn't comply with CRA standards. In 1995, President Clinton called on regulators to strengthen the CRA even more. But, the law did not require banks to make subprime loans. It didn't ask them to lower their lending standards. They did that to create additional profitable derivatives.