Bloomberg’s Awful Comment; What Can We Say For Certain Regarding the GSEs?
we should mention that the conservative think tanks spent the 2000s saying the exact opposite of what they are saying now, and the opposite of what Bloomberg said above. They argued that the CRA and the GSEs were getting in the way of getting risky subprime mortgages to risky subprime borrowers. My personal favorite is Cato’s Should CRA Stand for “Community Redundancy Act?”, (2000, here’s a writeup by James Kwak), arguing a position amplified in Cato’s 2003 Handbook for Congress Financial Deregulation Chapter: “by increasing the costs to banks of doing business in distressed communities, the CRA makes banks likely to deny credit to marginal borrowers that would qualify for credit if costs were not so high.”
Amazing. Yet this lie about the CRA causing the sub-prime crisis persists.