It’s Time to Put Up or Shut Up for People Who Blame the CRA for the Housing Crisis
Here’s a huge pat on the back and a show of support for Barry Ritholtz, who truly has had it with those who keep clinging to the widely discredited belief that the Community Reinvestment Act caused the housing crisis. Ritholtz writes at The Big Picture that he’s offering a debate challenge, with a prize of up to $100,000 to be paid by the loser, to anyone who will step up and debate him over whether the CRA should be blamed for the mortgage meltdown. A jury will determine who wins the debate.
I’ve run out of patience with tired memes and discredited claims by fools and partisans.
The rhetoric of those pushing nonsense on the public in an attempt to confuse rather than illuminate — the phrase is “agnotology” – only serves to aid the lobbyists working on behalf of the Banks and Investment houses to maintain the status quo.
All is well, nothing to see here, move along.
*Well, its time to put up or shut up: *I hereby challenge any of those who believe the CRA is at prime fault in the housing boom and collapse, and economic morass we are in to a debate. The question for debate: “Is the CRA significantly to blame for the credit crisis?”
A mutually agreed upon time and place, outcome determined by a fair jury, for any dollar amount between $10,000 up to $100,000 dollars (i.e., for more than just bragging rights).
I can’t help but applaud this. No matter how many times it has been shot down, the blame-the-CRA myth keeps coming back to life. As TWI has explained, the CRA, a 1977 anti-redlining law, didn’t even cover the unregulated lenders who made most of the subprime loans during the housing boom. There’s simply no evidence for this assertion.
The movement to blame the CRA started during the fall campaign season, seized by conservatives as a convenient scapegoat for the financial crisis. It came back to life recently, when bloggers like The Atlantic’s Megan McArdle picked up on Clusterstock postings by John Carney, once again citing the CRA as regulation gone wrong.
As McArdle put it, the CRA’s role in the crisis is “understated by liberals who are unwilling to admit that regulation, too, can produce hideous unintended consequences.”
Felix Salmon at Reuters has knocked down most of this. But I’d like to add something that’s regularly missed in the CRA debate. What the anti-regulation types miss is that the CRA never was much of a regulation to begin with. As Guy Cecala, publisher of Inside Mortgage Finance, which covers the subprime industry, told TWI, lenders never took the CRA all that seriously to begin with. The lending industry viewed the CRA as an extremely loose regulation. Lenders joked about how you’d have to mug an elderly, disabled, minority woman in a wheelchair to lose your positive CRA rating.
How that got turned on its head so that the CRA has become a symbol of regulation gone wrong is an example of what happens when idealogues who don’t know how an industry really works take over the debate. If Ritholtz’s bold offer gets some of this out on the table — and then off the table for good — it’s all for the better.
Salmon reports that Carney may be willing to take up Ritholtz on the challenge. So let the games begin. And let them put an end to the blame-the-CRA movement for good.