Byron York reports:
A number of experts believe that aggressive enforcement of the 1970s-era Community Reinvestment Act contributed to the mortgage meltdown, and thus to the greater financial crisis, by requiring financial institutions to lend to unqualified borrowers. Now, the Democratic majority in the House of Representatives is responding to that situation by proposing to expand the scope and power of the Community Reinvestment Act.
This morning House Financial Services Committee chairman Rep. Barney Frank held a hearing on H.R. 1479, the “Community Reinvestment Modernization Act of 2009.” The bill’s purpose is “to close the wealth gap in the United States” by increasing “home ownership and small business ownership for low- and moderate-income borrowers and persons of color.” It would extend CRA’s strict lending requirements to non-bank institutions like credit unions, insurance companies, and mortgage lenders. It would also make CRA more explicitly race-based by requiring CRA standards to be applied to minorities, regardless of income, going beyond earlier requirements that applied solely to low- and moderate-income areas.
Hard to believe, right? To Byron’s reporting, I would add that the Democrats are also seeking to give the power to enforce the CRA to the Consumer Financial Protection Agency they are trying to create:
As it stands, CRA enforcement is left to the regulators responsible for the safety and soundness of banks, such as the FDIC and the Fed. This law would put the authority to enforce CRA into the hands of an agency that would have no responsibility for ensuring safety and soundness. It would, however, have the power to set the terms under which banks lend to low-income borrowers, meaning it could force banks to make riskier loans while taking away their ability to charge commensurately for that risk.
The Democrats are refusing to learn the lessons of the crisis.