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Bill Clinton rewrote the Community Reinvestment Act, which many believe played a central role in the housing bubble[1]. Political policies do not take effect ov

Bill Clinton rewrote the Community Reinvestment Act, which many believe played a central role in the housing bubble[1]. Political policies do not take effect over night - Often their effects take decades to surface. 1.http://content.time.com/time/specials/packages/article/0,28804,1877351_1877350_1877322,00.html http://content.time.com/time/specials/packages/article/0,288...

inthewoods 12y ago
The meme of the CRA causing the housing bubble holds little water. A simple example of why this idea has very little validity: the housing bubble was a global phenomenon. As a second example: most of the questionable sub-prime lending during the housing bubble was done by private institutions not under the CRA regulation. Some good reading on the subject: http://www.ritholtz.com/blog/2011/11/examining-the-big-lie-how-the-facts-of-the-economic-crisis-stack-up/ http://www.ritholtz.com/blog/2011/11/examining-the-big-lie-h... Now if you want to talk about repealing Glass-Steagall or the lack of regulation of the derivatives market via the Commodity Futures Modernization Act (both mentioned in the article you link to), then I'm all ears.
- PublicEnemy111 12y ago
  While I don't believe the CRA was the root cause, I do believe it influenced the invention of MBS to relieve banks of the debt they deemed too risky for their own balance sheets
  - inthewoods 12y ago
    Based on what? Reference?
    - inthewoods 12y ago
      Hacker News continues to mystify me - getting knocked down for asking for a reference for a statement?
- prostoalex 12y ago
  > the housing bubble was a global phenomenon Is there a link that shows the foreclosure data in different countries? I find it hard to take at face value as some large real estate markets (e.g. China) don't even have the same structure (mortgages, underwriters, loan originator, loan repackager) as US does.
  - lena 12y ago
    I don't know about foreclosure data, but I also wouldn't look at just that, because regulations are different in other countries. I live in the Netherlands and a lot of people now (about 30%) have a mortgage that is worth more than the house. That is not a huge problem as long as they are able to pay the mortgage each month and do not have a pressing reason to move, do not get divorced, etc. but if they do need/want to move they end up with a debt for the difference of the value of the house and the mortgage (In this country, you cannot just walk away from your house and debt, you always remain responsible for the debt). I think the fact that 30% of all houses here are "underwater" is a better sign of a housing bubble than the amount of foreclosures because at least where I live in many cases banks prefer not to foreclose but put the house on the regular market and hope to sell it for a reasonable prices.
  - inthewoods 12y ago
    Foreclosure data is different from housing prices - which can be seen here: http://www.ritholtz.com/blog/wp-content/uploads/2011/11/Sept09_CF1.jpg http://www.ritholtz.com/blog/wp-content/uploads/2011/11/Sept... I agree with you about China - different structure - but this chart shows how the bubble spread throughout Europe.
johngalt 12y ago
It wasn't CRA that caused the housing bubble. It was cheap debt and public attitudes towards real estate investment.

inthewoods 12y ago

The meme of the CRA causing the housing bubble holds little water. A simple example of why this idea has very little validity: the housing bubble was a global phenomenon. As a second example: most of the questionable sub-prime lending during the housing bubble was done by private institutions not under the CRA regulation. Some good reading on the subject: http://www.ritholtz.com/blog/2011/11/examining-the-big-lie-how-the-facts-of-the-economic-crisis-stack-up/ http://www.ritholtz.com/blog/2011/11/examining-the-big-lie-h... Now if you want to talk about repealing Glass-Steagall or the lack of regulation of the derivatives market via the Commodity Futures Modernization Act (both mentioned in the article you link to), then I'm all ears.

PublicEnemy111 12y ago
While I don't believe the CRA was the root cause, I do believe it influenced the invention of MBS to relieve banks of the debt they deemed too risky for their own balance sheets
- inthewoods 12y ago
  Based on what? Reference?
  - inthewoods 12y ago
    Hacker News continues to mystify me - getting knocked down for asking for a reference for a statement?
prostoalex 12y ago
> the housing bubble was a global phenomenon Is there a link that shows the foreclosure data in different countries? I find it hard to take at face value as some large real estate markets (e.g. China) don't even have the same structure (mortgages, underwriters, loan originator, loan repackager) as US does.
- lena 12y ago
  I don't know about foreclosure data, but I also wouldn't look at just that, because regulations are different in other countries. I live in the Netherlands and a lot of people now (about 30%) have a mortgage that is worth more than the house. That is not a huge problem as long as they are able to pay the mortgage each month and do not have a pressing reason to move, do not get divorced, etc. but if they do need/want to move they end up with a debt for the difference of the value of the house and the mortgage (In this country, you cannot just walk away from your house and debt, you always remain responsible for the debt). I think the fact that 30% of all houses here are "underwater" is a better sign of a housing bubble than the amount of foreclosures because at least where I live in many cases banks prefer not to foreclose but put the house on the regular market and hope to sell it for a reasonable prices.
- inthewoods 12y ago
  Foreclosure data is different from housing prices - which can be seen here: http://www.ritholtz.com/blog/wp-content/uploads/2011/11/Sept09_CF1.jpg http://www.ritholtz.com/blog/wp-content/uploads/2011/11/Sept... I agree with you about China - different structure - but this chart shows how the bubble spread throughout Europe.

johngalt 12y ago

It wasn't CRA that caused the housing bubble. It was cheap debt and public attitudes towards real estate investment.