http://en.wikipedia.org/wiki/Community_Reinvestment_Act

The Community Reinvestment Act is a United States federal law that requires banks and savings and loan associations to offer credit throughout their entire market area and prohibits them from targeting only wealthier neighborhoods with their services, a practice known as "redlining." The purpose of the CRA is to provide credit, including home ownership opportunities to underserved populations and commercial loans to small businesses. It has been subjected to important regulatory revisions.



Original Act
The CRA was passed into law by the 95th United States Congress in 1977 (democrats)as a result of national grassroots pressure for affordable housing, and despite considerable opposition from the mainstream banking community. Only one banker, Ron Grzywinski from ShoreBank in Chicago, testified in favor of the act. The CRA mandates that each banking institution be evaluated to determine if it has met the credit needs of its entire community. That record is taken into account when the federal government considers an institution's application for deposit facilities, including mergers and acquisitions. The CRA is enforced by the financial regulators

The bill encouraged the Federal National Mortgage Association, commonly known as Fannie Mae, to enable mortgage companies, savings and loans, commercial banks, credit unions, and state and local housing finance agencies to lend to home buyers. It also encouraged the Federal Home Loan Mortgage Corporation, commonly known as Freddie Mac, to buy mortgages on the secondary market and sell them as mortgage-backed securities on the open market. Due to massive financial losses, on September 7, 2008 the Federal Housing Finance Agency put Fannie Mae and Freddie Mac under the conservatorship of the FHFA.


Clinton Administration Changes of 1995
In 1995, as a result of interest from President Bill Clinton's administration, the implementing regulations for the CRA were strengthened by focusing the financial regulators' attention on institutions' performance in helping to meet community credit needs. These revisionswith an effective starting date of January 31, 1995 were credited with substantially increasing the number and aggregate amount of loans to small businesses and to low- and moderate-income borrowers for home loans. These changes were very controversial and as a result, the regulators agreed to revisit the rule after it had been fully implemented for seven years. Thus in 2002, the regulators opened up the regulation for review and potential revision.[citation needed]

Part of the increase in home loans was due to increased efficiency and the genesis of lenders, like Countrywide, that do not mitigate loan risk with savings deposits as do traditional banks using the new subprime authorization. This is known as the secondary market for mortgage loans. The first public securitization of CRA loans started in 1997 by Bear Stearns. The number of CRA mortgage loans increased by 39 percent between 1993 and 1998, while other loans increased by only 17 percent.

Other rule changes gave Fannie and Freddie extraordinary leverage, allowing them to hold just 2.5% of capital to back their investments, vs. 10% for banks. By 2007, Fannie and Freddie owned or guaranteed nearly half of the $12 trillion U.S. mortgage market. [9]


George W. Bush Administration Proposed Changes of 2003In 2003, the Bush Administration recommended what the NY Times called "the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago." [10] This change was to move governmental supervision of two of the primary agents guaranteeing subprime loans, Fannie Mae and Freddie Mac under a new agency created within the Department of the Treasury. However, it did not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enabled them to issue debt at significantly lower rates than their competitors.The changes were generally opposed along Party lines and eventually failed to happen. Representative Barney Frank (D-MA) claimed of the thrifts "These two entities—Fannie Mae and Freddie Mac—are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." Representative Mel Watt (D-NC) added "I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing."


Read it and weep Socialists

its more fun to just blame people you don't like

like KRudd

This is nothing to do with anything other than the corrupt cronyism of leftists/ socialists/ progressives. Freddie and Fannie used huge lobbying budgets and political contributions to keep regulators off their backs. The top three U.S. senators getting big Fannie and Freddie political bucks were Democrats and No. 2 is Sen. Barack Obama. No. 3 is John Kerry. Another is extreme left Democrat Chris Dodd, Chairman of the Senate Banking Committee

Fannie and Freddie were creations of the congressional Democrats and the Clinton White House, designed to make mortgages available to more people and expressly people who couldn’t afford them. People who voted for the Democrats.

Fannie and Freddie have also been places for big Washington Democrats to go to work in the semi-private sector and pocket millions. The Clinton administration’s White House Budget Director Franklin Raines ran Fannie and collected $90 million. Jamie Gorelick — Clinton Justice Department official — worked for Fannie and took home $26 million. Big Democrat Jim Johnson, recently on Obama’s VP search committee, has hauled in millions from his Fannie Mae CEO job.

Leftists, turning to the deceit they are infamous for, and with the usual help of their suckholing media plants, are trying to pin this on to the right and the failure of free market ideology. Nothing could be further from the truth. It’s not even Republican policy and worse, they actually tried to do something about it. Worse again, the man telling most of the lies is Barack Obama, who was at the head of the line when the leftist/ socialist/ progressive piggies lined up at the Fannie and Freddie trough for campaign bucks.

GEORGE W BUSH!

The dumbest ever President of the U.S.

????

Again...none of that shows how anybody but the major investment banks are to blame for those same investment banks jumping all over the mortgage backed securities that they were offered.

They could have taken the Warren Buffet route and simply avoided all MBSs, but they didnt. If they did then the Fannie Maes and Freddie Macs would have absorbed all of the losses themselves. Seems to me that there was some Government Intervention to blame (though to be honest I dont buy into the crap that you are pushing), but there is also some (a lot) of blame that goes right onto the investors themselves who, given free reign in a barely regulated market, made too many big mistakes.

Anyone who calls themselves central is a lefty. And the fact that you dont like the anti-left "agenda" confirms it.

I know. haha

Yeah thats what i was saying.....you're a proud socialist....

haha You may, but the fact is he is a lefty.

Its easier to defend when you can just claim it as a negative agenda, as then you dont have to.

there is your answer