Source: IDuke, Wikimedia Commons -  Markham Suburbs, Nov 2005.

“CRA is not the culprit behind the subprime mortgage lending abuses, or the broader credit quality issues in the marketplace…”

“Indeed, the lenders most prominently associated with subprime mortgage lending abuses and high rates of foreclosure are lenders not subject to CRA.  A recent study of 2006 Home Mortgage Disclosure Act data showed that banks subject to CRA and their affiliates originated or purchased only six percent of the reported high cost loans made to lower-income borrowers within their CRA assessment areas.”
- John C. Dugan, Comptroller of the Currency, Speaking in Baltimore, 19 Nov 2008. [see References]

“When you don’t have the facts, argue the law; when you don’ t have the law, argue the facts.”
- Old legal maxim.

On 19 Nov, the Comptroller of the Currency made the above remarks, and you can read his complete text here.

That same day, the Vice Chairman of the Board of Governors of the Federal Reserve System discussed the influence that monetary policy had on home prices during the housing boom.  You can  read my analysis of his speech here.

In my analysis, I suggested that the Vice Chairman may not be giving us a complete view of the Fed’s role to the extent that he ignored the fact that monetary policy is just one of the four key responsibilities of the Fed, and that he neglected the impact that the Fed’s regulatory oversight role (or lack thereof) had during the housing boom.

I’d like to respectfully suggest that the Comptroller of the Currency may be employing a similar technique, and think we need to step back a bit.  As we sift among the wreckage of the housing market and our economy, I am concerned that everyone is acting as if:

1. Private housing is always a  good thing,  and
2. The more of it, the better.

People need to remember that the government’s historical devotion to, and promotion of,  private housing has its own costs.  In the most extreme case, people are killed.

If  you think that I’m kidding, then you’re wrong.  The best way to convince yourself of this is to read my words below, as well as this article by Hanna Rosin that appeared in the Atlantic Monthly.

As various “solutions” to support the housing market are quickly developed, passed into law, and discarded, you probably think it doesn’t really matter which “plan(s)” we follow, as long as something gets done.  Well-meaning but poorly conceived  implementations of governmental directives – like all actions – have consequences. 

To see this, put yourselves in the place of a Memphis married couple.  Richard is a criminologist, Phyllis – a housing expert.  He tracks violent crime.  She tracks where poor former public housing residents move after the city demolishes their projects.

One day, they look at their two separate maps, of crime and Section 8 resettlement, and realize that the two maps are the same.   Where people move, others are attacked or die. 

For the rest of this tragic 15 page story of good intentions gone awry, you must read Hanna Rosin’s American Murder Mystery.

- – - – - – - – - – -
 
I used to work with numbers for a living, but now I’m kicking around the neighborhood as I  look for a job or at least my next ‘idea’.   Till next time.

REFERENCES

 
John C. Dugan, Comptroller of the Currency – CRA not Responsible for Subprime Lending Abuses, 19 Nov 2008.

IDuke, Wikimedia Commons -  Markham Suburbs, Nov 2005.

D. Golobay, HousingWire – Dugan: CRA Had Nothing to Do with Mortgage, Credit Mess, 20 Nov 2008.

 
Hanna Rosin, The Atlantic – American Murder Mystery: Why is crime rising in so many American cities?, Jul-Aug 2008. 

The Band, Rock of Ages -  Time To Kill  and  Don’t Do It, Rhapsody/Capitol USA, 1972.