Just 8 days after Fed Governor Randall Kroszner gave a speech completely eviscerating the argument that the Community Reinvestment Act (CRA) had anything to do with the subprime crisis, the NYT decides to publish an op-ed by Howard Husock aruing that the CRA deserves a significant portion of the blame for the subprime crisis. Whichever editor decided to publish this op-ed should be immediately fired for gross incompetence. Randall Kroszner, in a speech on December 3:

[T]he findings of a recent analysis of mortgage-related data by Federal Reserve staff...runs counter to the charge that the CRA was at the root of, or otherwise contributed in any substantive way, to the current subprime crisis. ... Only 6 percent of all the higher-priced loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas. ... This result undermines the assertion by critics of the potential for a substantial role for the CRA in the subprime crisis. ... We found that loans originated under the NWA program [a portfolio of CRA-covered loans] had a lower delinquency rate than subprime loans. Furthermore, the loans in the NWA affordable lending portfolio had a lower rate of foreclosure than prime loans. The result that the loans in the NWA portfolio performed better than subprime loans again casts doubt on the contention that the CRA has been a significant contributor to the subprime crisis. ... [F]oreclosure filings have increased at a faster pace in middle- or higher-income areas than in lower-income areas that are the focus of the CRA. Contrary to the assertions of critics, the evidence does not support the view that the CRA contributed in any substantial way to the crisis in the subprime mortgage market.
Howard Husock, in tomorrow's NYT:
One cannot say with any certainty whether the more important cause of the current housing crisis was affordable-housing mandates or the actions of investment banks and ratings agencies.
Fire Andrew Rosenthal. Right now.


Mr Max Higgins said...

Bank of America and Mr. Higgins missing $millions, It can happen to you, my fellow Americans

More info: http://maxhiggins.com/blog/

bob gardner said...

Pretty much all of Husock's career falls in this same category. If you ever read Husock's magnum opus the Trillion Dollar Mistake (123 pages)you'll find 123 pages of blind quotes, even hearsay blind quotes, but not a single footnote.
Husock discusses the CRA in that book, dismissing it as unnecessary. All the credit for lending in red lined areas should go to deregulation, he says.
I've read a lot of bad housing books over the years, but even the worst have some idea that has to be confronted. Husock's core concept is that unmarried mothers are somehow unclean, and we should organize the nation's housing policies around Husock's fear of them.
You might think I'm overstating how bad Husock's work is. Believe me, there is no way to overstate it.


It least they know how to count.