Congresswoman Gwen Moore

I wish I could say that I was shocked when I saw a recent news story that quoted Republican Senate candidate Ron Johnson blaming the recession on the Community Reinvestment Act – a 1977 law that increased lending in communities where credit had traditionally been denied.

His argument is not new. But the argument is still wrong. At this point, nearly everyone knows that lax oversight of Wall Street fueled this recession.

Republicans in Congress have been wrongly pointing the finger at low-income, minority Americans and the CRA as cause for the subprime crisis and the recession for years.

If they took a closer look, they would know that it’s actually quite the opposite. CRA loans are safer. CRA banks have to prove that applicants can pay a loan back. But we got into this recession because regulators turned a blind eye and let banks give high-cost, high-interest loans to people who had no way to repay them.

Let’s get the facts straight: the CRA became law in 1977. For more than 30 years, we’ve been encouraging lenders to help Americans who otherwise would be denied the opportunity to own a home, which is still the greatest way to build wealth. Economists largely blame new types of irresponsible subprime mortgages for the mortgage crisis. Let’s place the blame where it belongs – not on the CRA.

Furthermore, regulators under President Bush told banks they didn’t have to lend as much to lower-income Americans under CRA obligations in the years leading up to the subprime crisis. And most major lenders in the subprime market did not participate in the CRA. In fact, many brokers, mortgage companies and Wall Street investment banks moved their risky lending to avoid requirements of the CRA.

Lastly, in 2005, the Federal Reserve reported that half of subprime loans were given by lenders and brokers outside of federal oversight, and an additional 30 percent were given by bank affiliates, which also fall outside of oversight. Conversely, only five percent of loans from CRA institutions, which must meet certain requirements, were high costloans.

There’s only one set of facts. And they are clear. The Community Reinvestment Act did not cause the subprime crisis. That’s indisputable. Were communities of color targeted by predatory lenders? Were credit rating agencies on Wall Street calling subprime mortgages safe investments? Were banks approving loans for folks without even checking to see if it could be repaid? All of this is true, but has nothing to do with the CRA.

What we see from Republicans is more of the same old, stale philosophy that government doesn’t have a role to play in protecting consumers because they believe the market alone is enough to protect us. We’ve seen what happens when we do it their way and it’s not pretty.

Whether Democrats were in charge of Congress or when we were in the minority, Republicans stood in our way when we wanted to stop predatory lending. And most recently they flat out said no to commonsense reforms to add accountability to Wall Street and ensure that Americans are never again left holding the bag for Wall Street’s mistakes.

I’m not looking to turn back the clock anytime soon. I’m not looking to let government turn a blind eye to Wall Street again. I’m looking to move forward.

Ron Johnson can get in line behind the people before him who pointed the finger at low-income Americans and the CRA. But next time he might want to look to see that those before him have also been proven wrong.

Gwen Moore

Articles

Don’t Blame the Community Reinvestment Act