Letter to the Editor: CRA Didn't Spur Subprime Loans

November 21, 2008, 2:00 a.m. EST 1 Min Read

To the Editor:

While I agree with Eric Grover that government should not be involved in allocation of credit ["Keep Government Out of Lending," Nov. 14], he is dead wrong in laying blame for the subprime mortgage crisis on the Community Reinvestment Act.

CRA considerations had nothing to do with lenders' abandoning sound underwriting practices. It had everything to do with producing income from the origination and securitization of loans. There weren't enough prime loans to feed the beast, and lenders increasingly went down market to keep the fees flowing.

The CRA explicitly does not require banks to engage in activities that are not safe and sound, and many of the participants in the subprime market were not subject to the regulation in any event. To suggest that, were it not for the CRA, lenders wouldn't have engaged in subprime lending and other now criticized practices is nonsense.David Mooney
Chief executive officer, Alliant Credit Union
Chicago

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