You’ve heard over and over about how the 1977 Community Reinvestment Act (CRA) could not bear any blame for the mortgage meltdown that began in 2007 because the time lag was too vast. As the New York Times editorialized on October 15, 2008: “First, how could a 30-plus-year-old law be responsible for a crisis that has occurred only in recent years?”
That seems like a good question. Three decades is a long time.
Last Thursday, though, I found an eye-opening graph of cumulative Community Reinvestment Act promises by banks from 1977 through 2005. According to the September 2005 report CRA Commitments by the National Community Reinvestment Coalition (NCRC), which bills itself as "the nation's economic justice trade association of 600 community associations:”
As the chart below shows, $4.2 trillion in CRA dollars was committed from 1992 through 2005. In contrast, $8.8 billion was negotiated from 1977 through 1991.
When measured in terabucks, the Community Reinvestment Act was negligible until the 1990s. And it was still small potatoes until the Clinton “reforms” of 1995 and the rise of well-organized pressure groups of the kind affiliated with the NCRC.
But the biggest flood of CRA assurances came during the presidency of George W. Bush, who repeatedly called in 2002-2004 for 5.5 million more minority homeowners by 2010. Cumulative bank pledges (typically doled out over ten years) grew from $1.85 trillion in 2002 to $4.20 trillion in 2004.
Indeed, total CRA commitments increased by $1.63 trillion in 2004 alone, the first year of the Housing Bubble.
February 15, 2009