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Regulators were not MIA, they were all too present, forcing banks to extend risky loans by threatening anti-redlining lawsuits. The non-existent common sense w
by temphn 15y ago
Regulators were not MIA, they were all too present, forcing banks to extend risky loans by threatening anti-redlining lawsuits.
The non-existent common sense was the premise that you shouldn't loan to people who can't pay.
This common sense got suspended by government/NGO fiat because many of those who couldn't pay were minorities. No securitization hijinks could have happened if those mortgages hadn't been forced into the system in the first place.
- RockyMcNuts 15y agoThat's ridiculous and beside the point. It's ridiculous, because CRA loans were a tiny fraction of delinquent loans, they didn't go bad at meaningfully higher rates, the non-bank mortgage lenders like New Century that made the worst loans weren't covered by the CRA, something like 15% of loans over $1m were delinquent. It's beside the point, because a well-designed financial system wouldn't blow up insurance companies, S&Ls, brokers, all because banks are required/encouraged to make a small percentage of their loans in underserved areas. It's called confirmation bias, humans can and will believe what makes them comfortable.