One Law That Put Us In This Mortgage Mess

The 1977 Community Reinvestment Act forces banks to lend money to people in bad neighborhoods who are lousy credit risks. It is not worth fighting the bureaucrats and the politicians. It is simply easier for the banks to lend money who are not good risks for repaying their loans. It is suicidal economics.

Because of this law, banks are graded on their lending to folks in poor and minority neighborhoods.

Banks used to avoid lending money for mortgages in bad neighborhoods because it did not make economic sense, not because banks were opposed to receiving monthly mortgage payments from black people.

The Washington Post reports: The 1977 Community Reinvestment Act was intended to end redlining, a practice in which banks in effect walled off many inner-city neighborhoods from mortgage loans. But some GOP lawmakers say it has outlived its purpose and is being used inappropriately by ACORN to shake down banks for money. They want to repeal the law, scale it back or at least block a Democratic proposal to expand it.

Critics of the law are linking it to ACORN – a subject many Democrats wish would go away – at every opportunity.

"Should we repeal CRA? Absolutely," said Rep. Jeb Hensarling, R-Texas, a member of the House Financial Services Committee. "Do we have the votes for it today? I seriously doubt that."

Rep. Ed Royce, R-Calif., also on the committee, has described ACORN's actions under the law as "legalized extortion," contending that the law gave ACORN the power to stall or prevent bank mergers or expansions by filing CRA complaints with regulators.