You can’t solve a problem until you identify its essence.  That is one of the challenges facing policy makers trying to get our economy back on its footing.

One of the root causes of the recession is the overhang that we are suffering through as so many bad mortgages slowly deplete the balance sheets of our banks. The troubles on Wall Street have spread to Main Street.  Many of our communities have fallen hard and fast.

It was a time of fast lending.  It was a time of loose underwriting.  The share of subprime mortgages (more…)

We need a stronger Community Reinvestment Act because we need sound mortgage lending.

If that was the only thing that passing HR 1479 (The Community Reinvestment Act Modernization Act (join the cause here) did, then it would be enough.  Yet that purpose is only one reason among a multitude for passing a “safety-and-soundness” mortgage law. There are others – we need to have more sunlight on lending, as well.  The CRA bill would put more teeth into enforcement efforts, and that would also make a difference.  We need to put lenders of all stripes on the same regulatory footing, too.

A lot of dubious and deceptive effort has been made to cast the CRA as a villain.  No crisis should go (more…)

The minimum wage is nice, but there are more efficent ways for the federal government to prevent poverty. We should think again about another increase to minimum wage, and instead think about putting more dollars into the Earned Income Tax Credit (the “EITC.”)

We like increasing the minimum wage because it enhances the livelihood of the poor, but it is not a welfare program.  It still requires that people work.

That said, its hardly the most direct way of targeting low-income working households.  The Economic Policy Institute suggests the minimum wage hits low-income households narrowly.  In a recent report, they estimated that almost two-thirds (63 percent) of gains from a minimum wage increase go to workers in the bottom 40 percent of income.

But what about the other 37 percent?  Well, that’s the first part of the problem.  Many of the other (more…)

You may have heard some of the arguments against the CFPA:

• it will thwart innovation of financial products
• it will harm choice, including choices for low-income consumers
• it will add an unneeded layer of regulation

It should not be surprising that a lot of these arguments are made by people who have a friendly view of big (more…)

Community Development Financial Institutions (CDFI) may be challenged by the riches in the near future. On Sept. 22nd, 2008, Goldman Sachs was converted to a bank holding company by the Federal Reserve.  Morgan Stanley has gone through the same process. The Federal Reserve’s intention was to be able to shore up the capitalization of these firms through its TARP program.

As banks, though, GS and MS are suddenly under the regulatory scope of the same forces that govern other banks.  This includes the examination under the Community Reinvestment Act.

These firms have undergone some scrutity for the CRA in the past.  They have each fared well.  Goldman Bank (more…)