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I told you so…

Well, I am going to revel in the “I told you so moment”, but yet another study asking the question”Did the Community Reinvestment Act (CRA) Lead to Risky Lending?“, reports that:

Yes, it did. We use exogenous variation in banks’ incentives to conform to the standards of the Community Reinvestment Act (CRA) around regulatory exam dates to trace out the effect of the CRA on lending activity. Our empirical strategy compares lending behavior of banks undergoing CRA exams within a given census tract in a given month to the behavior of banks operating in the same census tract-month that do not face these exams. We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks. The effects are strongest during the time period when the market for private securitization was booming.

Social engineering sucks. You can not socio-engineer the laws of economics or human nature. These attempts, no matter how brutally imposed, have always failed. It did this time too, as the CRA basically was an attempt to bend the laws of economics and human nature in an attempt to make irresponsible people responsible while somehow also producing money. Trillions were lost and these effects will be with us for decades. After a lot of grandstanding and political theater, we got a lot more government regulation, regulation that makes it easier for politicians that want to sell special favors to do so, but never addressed the fundamental and underlying problem the CRA causes, and are looking at a repeat, sooner than later.

There is a reason that government ended up paying TARP money, and it was not just the too big too fail bullshit they sold us. They paid because that was part of the CRA deal. Government would save the lenders when economic reality blew the house of cards down. Our politicians, I suspect, realized that if they didn’t keep their part of this deal with the devil – the government plays the role of the devil here in case you are not bright enough to grasp that – they forced on the lenders, that their socio-engineering days where going to be numbered. The problem was the CRA and our government’s unbelievably stupid need to socio-engineer the left’s idea of Utopia, but we can keep pretending the problem is the big banks and not our government. What could possibly go wrong with more of the same?

6 comments

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  1. Seattle Outcast says:

    CM will, once again, climb on the denier’s bandwagon on this one. Libtards are in particular denial over this one, to the point of nearly choking to death trying to shift the blame over to financial institutions for 100% of the blame. None of them want to invest in a real hard look back at 35 years of failed social policies forced onto lenders with the threat of having their charters to do business revoked.

    Let’s give a big heaping helping of blame to Clinton, Carter, Barney Frank, and every other liberal who thought that social engineering in private business was/is a great fucking idea.

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  2. CM says:

    How hilariously predictable to pop in after a few days of festive cheer and see you humping my leg. And just as predictable as that, you’re arguing against your usual big bad lefty bogie-man, not me.
    Superb.

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  3. Hal_10000 says:

    I think you should read the study. I blogged about it a while ago. It claims that the CRA was an “amplifying mechanism” that made the crisis much worse. it does not say that it caused the crisis.

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  4. Hal_10000 says:

    Also, Alex, could you fix the HTML in your post? The last link is missing.

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  5. AlexInCT says:

    I think you should read the study. I blogged about it a while ago. It claims that the CRA was an “amplifying mechanism” that made the crisis much worse. it does not say that it caused the crisis.

    Really Hal? I read it too. I was pretty certain that the study both blamed the CRA and pointed out how government enforcement mechanisms to force compliance exacerbated the problem. Let me ask why the Bureau for Economic Research, where this is linked from, posted the question I titled my link with, then answered it with a” yes”, if all the CRA did was make it worse, and not cause it? Are they lying?

    And I got the impression that the mention of an amplifying mechanism you refer to was about the government enforcement of the exams which then led to the riskier lending that the CRA enshrined. That to me pretty much says that the CRA caused the problem and then made it worse. Maybe I am dumb and am not bright enough to dismiss the connection between the government demanding and forcing horribly risky lending practices, so they could socio-engineer prosperity, and those high risk cases eventually defaulting en masse, like you are.

    The people that want to give stupid government regulation a pass so they can just keep blaming evil banks, will never accept the reason for the problem. That is why it will be smacking us in the face sooner than later yet again.

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  6. Seattle Outcast says:

    Just like several other concepts, “leg humping” isn’t something you actually comprehend very well, is it? Is this one of those nebulous concepts like “keep fucking that chicken” that you struggle with, or do you mistake ridicule for admiration? If it’s the latter, you really do need to keep taking your meds on schedule.

    Anyway, leave it to a complete intellectual lightweight that copy/pastes his “opinions” right out of Daily Kos to not recognize when someone is pointing out that you’re such a stuck record that you can either shut up completely on a topic or have your opinion read back to you in advance based on the last five times you’ve “argued” it.

    And, as our resident far-left troll, any argument made of “far left bogie-man” fits you perfectly. You are that fucking predictable.

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