H.R. 1479

Have you heard of H.R. 1479, the Community Reinvestment Modernization Act of 2009? This legislation, sponsored by Democratic Rep. Eddie Bernice Johnson and all but ignored by the MSM, would expand the original 1977 Community Reinvestment Act (CRA), a bill that required banks to make loans in low-income areas that many lenders had ignored. The intent of the 1977 legislation was commendable – to encourage home ownership among all Americans. But the legislation had unintended and catastrophic consequences that culminated in the economic debacle the began about a year ago. Byron York explains:

The problems began in the 1990s, when Congress made it harder for lenders to do business if they had not passed the CRA "exam" -- that is, if they had not met the government-imposed standards for loans to low- and moderate-income borrowers.

"From 1995 on, there was an incredible push by the Clinton and Bush administrations in every way they could -- CRA, Fannie Mae, Freddie Mac, and other ways -- to increase the homeownership rate," says Russell Roberts, a professor of economics at George Mason University. "What that did was to push up the price of housing, and that made it imaginable to lend money to people you never would have lent money to, on terms you wouldn't have done before."

In particular, Fannie Mae began to aggressively promote homeownership using the Community Reinvestment Act to give loans to people who couldn't afford them. Fannie went to bankers and said, make as many CRA loans as you can; we'll buy them and take them off your hands. "Our approach to our lenders is 'CRA Your Way,' " top Fannie executive Jamie Gorelick told the Mortgage Bankers Association in 2001. "Fannie Mae will buy CRA loans from lenders' portfolios; we'll package them into securities; we'll purchase CRA mortgages at the point of origination. ..."

Fannie promised to buy billions and billions of dollars worth of CRA loans because it was under pressure to do so from the Department of Housing and Urban Development, which in turn was under pressure from Congress, which set ambitious quotas for low- and moderate-income loans.

The policy ended in a lot of people losing their homes.

The seemingly innocuous CRA legislation, coupled with irresponsible and greedy Wall Street firms, incompetent rating agencies, poorly crafted or non-existent federal regulation, and government “watchdogs” like Barney Frank and Chris Dodd who refused to recognize the growing storm, led to the greatest economic collapse since the Great Depression.

And now, in the words of Byron York, “Democratic majorities are pressing hard to expand some of the very policies that led to the reckless home lending that in turn helped lead to the great financial meltdown.”

Has the Democratic Congress gone completely mad? In their quest for “social justice” are they willing to set the stage for still another debacle down the road?

Sometimes you can only shake your head in amazement at the utter stupidity of those who purport to lead us.