- 1977 - Community Reinvestment Act
In 1977 a Democratic majority in both the House and Senate pass the Community Reinvestment Act which is signed into law by then President Jimmy Carter. This act is passed with the assumption it will help low income citizens and business people receive equal treatment by banks. The Law for the most part is not enforced and/or ignored until the 90's.http://en.wikipedia.org/wiki/Community_ ... Bernanke-1
...law that requires banks and savings and loan associations to offer credit throughout their entire market area. The act prohibits financial institutions from targeting only wealthier neighborhoods with their services, a practice known as "redlining." The purpose of the CRA is to provide credit, including home ownership opportunities, to under-served populations, and commercial loans to small businesses.........
.........The CRA mandates that each banking institution be evaluated to determine if it has met the credit needs of its entire community. That record is taken into account when the federal government considers an institution's application for deposit facilities, including mergers and acquisitions.........
- 1992 - The Federal Housing Enterprises Financial Safety and Soundness Act of 1992
The Federal Housing Enterprises Financial Safety and Soundness is passed in 1992 by a majority Democratic Congress in both the house and the Senate. Outgoing President George H. Bush signs the bill.
Will let good ole Fannie speak for herself:http://www.fanniemae.com/aboutfm/charter.jhtml
The Federal Housing Enterprises Financial Safety and Soundness Act ("FHEFSSA") of 1992 modernized the regulatory oversight of Fannie Mae and Freddie Mac. It created the Office of Federal Housing Enterprise Oversight ("OFHEO") as a new regulatory office within HUD with the responsibility to "ensure that Fannie Mae and Freddie Mac are adequately capitalized and operating safely." OFHEO is funded by assessments on Fannie Mae and Freddie Mac and is authorized to act without HUD oversight on a range of regulatory issues enumerated in the statute. FHEFSSA established risk-based and minimum capital standards for Fannie Mae and Freddie Mac. And, it established HUD-imposed housing goals for financing of affordable housing and housing in central cities and other rural and underserved areas.
- 1993 - White House Press Briefing
Announcement by Clinton Staff of his intentions to reform the Community Reinvestment Act.http://clinton6.nara.gov/1993/12/1993-1 ... .text.html
Hi. I'm Bob Rubin, the Assistant to the President for Economic Policy, and I'm going to introduce today's topic.
The President, as you know, has a broad, comprehensive strategy for dealing with the economic problems of the country for putting the country back on the right track for the long-term. A lot of the legislative and executive actions that have taken place in 1993 have been pursuant to that long-term economic strategy of the President's.
An important component of that strategy is to deal with the problems of the inner city and distressed rural communities -- pursuant to his belief that we must make real progress in those areas if this country is going to be successful in the future for all of us. The reform of the Community Reinvestment Act is an essential building block in the efforts I've just mentioned.
In July the President asked the four banking regulators to reform CRA, to reduce paperwork in process and reward performance, and to get that done by January 1, 1994. We're delighted to report that that has been accomplished on schedule. And in conjunction with the President's Community Development Bank and financial institution legislation, which recently passed the House of Representatives, CRA reform will generate billions of dollars in new lending and extend basic banking services to the inner cities and to distressed rural communities around the country.
- 1995 - Clinton Does End Run Around Congress
- http://www.federalreserve.gov/newsevent ... 80213a.htm
Sandra F. Braunstein, Director, Division of Consumer and Community Affairs
The Community Reinvestment Act
Before the Committee on Financial Services, U.S. House of Representatives
February 13, 2008
The CRA regulations were substantially revised again in 1995, in response to a directive to the agencies from President Clinton to review and revise the CRA regulations to make them more performance-based, and to make examinations more consistent, clarify performance standards, and reduce cost and compliance burden. This directive addressed criticisms that the regulations, and the agencies' implementation of them through the examination process, were too process-oriented, burdensome, and not sufficiently focused on actual results. The agencies also changed the CRA examination process to incorporate these revisions.
The new regulations make it harder for banks to get CRA unless they're giving loans... This is time when the banking industry is going through a time when mergers are at a high. Banks will also have to answer to groups like the NCRC and Acorn, both institutions at this point are demanding help for the people in foreclosure... like they are going to be able to pay it now. Sure can't pay for that house? we'll buy it for you,
These Consumer Advocacy groups hold enormous power over banks and is some cases decided who was going to get loans:
- The Trillion-Dollar Bank Shakedown That Bodes Ill for Cities Winter 2000
http://www.city-journal.org/html/10_1_t ... ollar.html
The Clinton administration's get-tough regulatory regime mattered so crucially because bank deregulation had set off a wave of mega-mergers, including the acquisition of the Bank of America by NationsBank, BankBoston by Fleet Financial, and Bankers Trust by Deutsche Bank. Regulatory approval of such mergers depended, in part, on positive CRA ratings. "To avoid the possibility of a denied or delayed application," advises the NCRC in its deadpan tone, "lending institutions have an incentive to make formal agreements with community organizations." By intervening—even just threatening to intervene—in the CRA review process, left-wing nonprofit groups have been able to gain control over eye-popping pools of bank capital, which they in turn parcel out to individual low-income mortgage seekers. A radical group called ACORN Housing has a $760 million commitment from the Bank of New York; the Boston-based Neighborhood Assistance Corporation of America has a $3-billion agreement with the Bank of America; a coalition of groups headed by New Jersey Citizen Action has a five-year, $13-billion agreement with First Union Corporation. Similar deals operate in almost every major U.S. city. Observes Tom Callahan, executive director of the Massachusetts Affordable Housing Alliance, which has $220 million in bank mortgage money to parcel out, "CRA is the backbone of everything we do."
In addition to providing the nonprofits with mortgage money to disburse, CRA allows those organizations to collect a fee from the banks for their services in marketing the loans. The Senate Banking Committee has estimated that, as a result of CRA, $9.5 billion so far has gone to pay for services and salaries of the nonprofit groups involved. To deal with such groups and to produce CRA compliance data for regulators, banks routinely establish separate CRA departments. A CRA consultant industry has sprung up to assist them. New financial-services firms offer to help banks that think they have a CRA problem make quick "investments" in packaged portfolios of CRA loans to get into compliance.
The excerpt is from and article with another excerpt that is hauntingly accurate:Looking into the future gives further cause for concern: "The bulk of these loans," notes a Federal Reserve economist, "have been made during a period in which we have not experienced an economic downturn." The Neighborhood Assistance Corporation of America's own success stories make you wonder how much CRA-related carnage will result when the economy cools.
- Freddie Mac and Fannie Mae are required to provide mortgages to people that in some cases can't get a credit card.
- 1999 - Gramm-Leach-Bliley Financial Services Modernization Act
This Republican sponsored act would be a major overhaul of the Banking industry and allow for the commercial and investment banks and other financial institutions to consolidate. The main sticking point between the bill as presented by the Republicans is the CRA .
http://partners.nytimes.com/library/fin ... gress.html
Gramm had maintained that he did not want anything in the bill that would expand the application of the Community Reinvestment Act because it was, he said, unnecessarily burdensome to banks. He had sought a provision that would exempt thousands of smaller banks from the law. He also wanted a provision that would expose what he has described as the "extortion" committed by community groups against banks by requiring the groups to disclose any special financial deals the groups extract from the banks.
But the White House found that provision unacceptable and had its own ideas about community lending. It wanted the legislation to prevent any bank with an unsatisfactory record of making loans to the disadvantaged from expanding into new areas, like insurance or securities.
The White House had insisted that the President would veto any legislation that would scale back minority-lending requirements. Four days of intense negotiations between Summers, Gene Sperling, the President's top economic policy adviser, and Gramm, while moving the two sides closer, failed to resolve the differences.
Such was the state of play Thursday evening when Gramm decided to force the issue by having the House-Senate conference committee vote on his proposed compromise, which the White House had already rejected for failing to block banks with bad lending records from expanding to new businesses.
When Gramm's measure was defeated by one vote, it quickly became clear that there would be no law unless Gramm could get some Democrats to break from the White House.
But Administration officials had spent all day making sure that the Democrats remained solidly against the measure until their concerns about the Community Reinvestment Act could be worked out.
As early as 1999 the Republicans had introduced legislation that very may well have stopped this mess we are in now however the bill did not pass pass without the following amendments:Banks will not be able to move into new lines of business unless they have satisfactory lending records.
Community groups will have to make disclosures to regulators about certain kinds of financial deals with banks that they have pressed to make loans under the Community Reinvestment Act.
Wholesale financial institutions, a new kind of business that takes large, uninsured bank deposits, cannot be affiliated with commercial banks.
Small banks with satisfactory or excellent track records of lending to the underserved would be reviewed less frequently under the Community Reinvestment Act. As a practical matter smaller banks are reviewed about every three years. The deal struck today allows all rural banks and banks with less than $250 million in assets to undergo examination once every five years if their last exam resulted in an "outstanding" grade and every four years if they last scored "satisfactory."
- 2003 - New Agency Proposed to Oversee Freddie Mac and Fannie Mae
President Bush proposes new new agency to oversee Fannie and Freddie Mac 2 years into his first term. Opposed by Democrats the new oversight never materialized.
http://query.nytimes.com/gst/fullpage.h ... nted=print
The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.
Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.
The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.
The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.
''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''
Representative Melvin L. Watt, Democrat of North Carolina, agreed.
''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said.
- 2004 - Former president Clinton Gets His Wish
3 years later than he wanted fueled by questionable loans homeownership hits a record high.
Various scandals and other issues are unearthed about Freddie and Frannie....
- 2005 - POP