From The Seattle Times
By Froma Harrop

Accomplished Googlers can probably find the original talking points off which dozens of conservatives made essentially the same case: The Community Reinvestment Act of 1977 caused the financial crisis. For example, a Wall Street Journal editorial lumped CRA together with far-more-plausible causes of the meltdown. This liberal-inspired law, it complained, “compels banks to make loans to poor borrowers who often cannot repay them.”

In fact, the CRA had about zero to do with today’s problems. Its accusers are “know-nothings,” Aaron Pressman writes on BusinessWeek.com. He says the law “was actually weakened by the Bush administration just as the worst lending wave began.”

The CRA requires federally insured banks and thrifts to lend in the low-income neighborhoods where they take deposits, but consistent with safe banking practices. It was created to stop redlining, the practice whereby banks refused to lend money in certain areas — read minority neighborhoods — regardless of their residents’ credit histories.

The most obvious clue that CRA did not cause the mess is its date. The musical “Annie” opened in 1977, and the Eagles’ “Hotel California” was the No. 1 song. That was a long time ago, 31 years, to be precise. If the CRA created this time bomb of lousy loans, why didn’t it go off in 1980 or 1996?

The writing of crazy mortgages for low-income people — loans with exploding interest rates, brutal fees and no demands for documentation — was a post-2003 phenomenon. In 2004, the Bush administration actually slashed CRA regulation, freeing small banks and thrifts from its toughest standards.

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