A few reactions to the first round of testimony on the CRA Modernization Act hearings, going on right now in the House Financial Services Committee.
It is interesting how facts can provoke some very reactions. Congressmen for and against the CRA bill seem to be citing the same facts, but then coming to different conclusions about that means for making policy in the future.
fact: 99 percent of banks are meeting the standards for complying to the CRA, according to exams. This is true. In 2008, more than 2000 banks were examined. About 25 were given some kind of sanction. The question this seems to provoke is where there is a difference. Rep. Hensarling, Rep. Neuberger, and Rep. Royce assert that this means that the Act is being served. Waters points out that Countrywide, a lender not regulated by CRA, was writing a lot of subprime loans.
fact: Acorn was caught on tape in Baltimore with some real shenanigans. True. Rep. Hensarling leads with this news, and asserts that it is an example of why CRA is wrong-headed. Rep. Frank and Waters both seem to feel that this is a stretch. Frank leaves ACORN out to dry. He doesn't appear to want to push back on the meaning of what ACORN did,
but only to say that the Bush Administration spent $8 million supporting ACORN. Waters says that talking about ACORN is a ruse.
fact: Fannie Mae asked lenders to make more loans to lmi consumers. Barney Frank asserts that this was Bush Administration policy. Hensarling says that it is driven by attempts to meet CRA. Franks goes further...was Bush doing too much to promote ACORN? Total funding under Bush Admin for ACORN is $14.3 million.
fact: CRA loans were securitized. Hensarling mentions that $20 billion in CRA loans were securitized. Then he says, "the rest is history." Well, what is the "rest." Could that be the trillions of non-CRA subprime loans that were securitized?
fact: Lawrence White says that "I represent solely myself at this hearing." White says things that the supporters of CRA would disagree with.
- White says that CRA is anachronistic.
- White says that geography should be excluded from CRA.
- White says that CRA is making banks exit from putting branches into LMI areas.
White says things that opponents of CRA would disagree with:
- White states that critiques asserting the CRA is responsible for the subprime debacle are "deeply flawed."
- White states the government needs to spend more time regulating the ECOA.
- White says that it was wrong to keep Wal-Mart out of the banking business. The big banks hate the idea of seeing Wal-Mart move into their sector. They know that Wal-Mart would do a lot to put pressures on all of those checking account fees.
- Intention of CRA is good.
White then has some ideas that are very academic, but probably not realistic. He proposes that loans to LMI consumers should be modeled after regulation of sulfur dioxide. He suggests a cap-and-trade system.