Banking and Credit Quotes

[The bill], while well-intentioned, will increase the cost of credit for consumers and small businesses across the country, result in less access to credit for consumers and businesses alike, and may further roil the securities markets -- all at a time when our economy can least afford it.

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Edward Yingling, president and CEO of the American Bankers Association. CreditCards.com.

Legislation likely to result in higher interest rates for consumers is not the answer. [This bill] would broadly constrain the ability of financial institutions to price risk, likely resulting in less access to credit and in higher interest rates for consumers.

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The Bush White House’s statement, CreditCards.com.

There are also subsidies to certain types of mortgages. The Community Reinvestment Act bans so-called ‘red lining’ -- requiring banks to offer mortgages in the entire geographic area in which they operate, not just to do business in suburbs. Loans in profitable areas were then used to subsidize loans in areas where banks were losing money.

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John Lott Jr., Fox News

The CRA has created opportunities for rent seeking and financial and logistical burdens for all lenders. The Act forces lenders to spend money, time, and resources on documentation, PR, and other compliance costs.

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Michelle Minton, Competitive Enterprise Institute

The CRA, by encouraging loosening underwriting standards, may have contributed to the massive increase in foreclosure rates.

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Michelle Minton, Competitive Enterprise Institute

The Community Reinvestment Act does not appear to have had any positive effect on lending to residents of LMI neighborhoods. In fact, it appears to have had a negative effect on CRA lenders and LMI residents alike… While both CRA- and non-CRA lenders have increased the number of loans to low-income borrowers, the financial soundness of CRA-covered institutions decreases the better they conform to the CRA.

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Michelle Minton, Competitive Enterprise Institute

In 1989, sympathetic members of Congress got the Home Mortgage Disclosure Act amended to force banks to collect racial data on mortgage applicants; this allowed various studies to be ginned up that seemed to validate the original accusation… bank regulators required the loosened underwriting standards, with approval by politicians and the chattering class. A 1995 strengthening of the Community Reinvestment Act required banks to find ways to provide mortgages to their poorer communities. It also let community activists intervene at yearly bank reviews, shaking the banks down for large pots of money.

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Stan Liebovitz, New York Post.
338602/05/2008 | Full Details | Law(s): Community Reinvestment Act

The subprime mortgage market, which makes funds available to borrowers with impaired credit or little or no credit history, offers a good example of competition at work…To the contrary, it was lenders in the control group that refocused their efforts in line with the mid-1990s boom in lending in low-income neighborhoods. In fact, lending in low-income neighborhoods grew faster than other types of lending at institutions not covered by CRA, whereas low-income lending grew at the same rate as other types of lending activity for CRA-covered lenders. As a group, lenders not covered by CRA devoted a growing proportion of their home-purchase lending to low-income communities, with the community lending share of their loan portfolios rising from 11 percent in 1993 to 14.3 percent in 1997. In contrast, CRA-covered lenders, as a group, devoted about the same proportion of their home-purchase loans to low-income neighborhoods in 1997 as they did in 1993. In both years, their community-lending share was about 11.5 percent. Even though those institutions were subject to CRA, their lending in low-income communities grew no faster than other lending. Those results would not be expected if CRA were the impetus for increases in lending in low-income neighborhoods. The data, however, are consistent with deregulation and technological advances leading to lower information costs and increased competition in the mortgage market. Independent mortgage companies tend to have more leeway to specialize in relatively risky lending than their more conservative and more heavily regulated counterparts in the banking industry. It is not surprising, then, that independent companies took the lead in focusing on lending activity in the riskier segments of the mortgage market… The inescapable conclusion is that progress predicated on technology, financial innovation, and competition—not CRA—has broadened the U.S. financial services marketplace.

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Jeffrey Gunther, Cato Institute
338411/08/2000 | Full Details | Law(s): Community Reinvestment Act

CRA has enabled special interest groups to collect billions of dollars from banks under agreements that are kept secret. Even the citizens that these groups purport to represent have no way of knowing how the groups spend the money they get from banks. That s why I hope the Senate will approve a sunshine amendment that will add accountability to this process and bring these agreements into, the light of day.

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Senator Phil Gramm , Chairman of the Senate Committee on Banking, Housing and Urban Affairs.

The Community Reinvestment Act should be repealed--not reformed or restricted but repealed! For no conceivable set of regulations on a bank is consistent with the objective of the Act to meet ‘the credit needs of its entire community, including low and moderate-income neighborhoods, consistent with safe and sound operation of such institution.’ The Community Reinvestment Act was the wrong solution to a genuine problem, for the most part created by other government regulations. Until recently, federal restrictions on interstate banking and state restrictions on intrastate branching severely restricted bank competition in local markets and the potential for geographic diversity of loan portfolios. These restrictions have been substantially reduced, promising a more competitive banking system that is more responsive to the interests of both depositors and borrowers and less vulnerable to adverse economic conditions in specific regions...Don't try to fix the Community Reinvestment Act. It can't be done. Repeal it.

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William A. Niskanen, Chairman, Cato Institute. Testimony, Subcommittee on Financial Institutions and Consumer Credit, House Committee on Banking and Financial Services

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