Banking Financial Reform—Is More Bureaucracy The Answer?
by: Pamela D. Hart As we know our Financial System took a major hit at the end of 2008. Let’s take a little look see at how this played out, shall we… The Community Reinvestment Act is a federal law that was passed in 1977 to “encourage” banks and savings associations “to meet the needs of borrowers in ALL segments of their communities, [emphasis mine] which included low and moderate-income neighborhoods”. Congress felt this law needed to be passed in order to prevent discrimination against low-income and minority borrowers. There were legislative changes made to the CRA over the years, but the most pertinent one, in my opinion, was the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, which required Freddie Mac and Fannie Mae to devote a percentage of their lending to support affordable housing. Basically this Act instructed Freddie and Fannie to divide its business into three categories: low and moderate-income, underserved, and special affordable. The goa...