Of course, it led to risky lending. These people had no hope of paying for a thirty year mortgage. Especially, when Bill Clinton helped to send the American manufacturing base to China. When you combine giving gov't-backed mortgages to high risk people and American jobs' flight to China, the outcome is certain- economic decline and disaster in the US. The only question is: Are Democrats this clever or this stupid?
A good intentioned program that never would have worked long term. You can't force banks to give loans to people without the means to pay them back. The banks should have realized this and either told the Gov't where to go and how to get there, or just quietly said no to the applicants who wouldn't be able to pay back the loan and dealt with the consequences later.
Of course this led to the meltdown. Unable to comply with CRA without knowingly writing bad paper, banks pressed Fannie Mae & Fredie Mac to spread the risk as widely as possible. If CRA had not caused a mountain of bad paper the bundling would never have happened.
Ayuh,.... That pretty much defines every single Liberal Progressive program ever thought up,..... Muchless implemented...
Unintended consquences, banks get pressured to make loans they realize will probably be a burden to them. So what banks did to protect themselves was to pile all the loans together in one massive (*)(*)(*)(*)storm, sell it as a financial investment. AKA derivatives, and unload them from their books. Turns out they could make good money doing this, so then they actively tried to get as many loans as they could, to hell with the credit riskiness. A few years later... Boom goes the bubble.
Although I think the CRA was the kindling that started the fire, we had the program for decades until the Clinton administration changed the law, leading to a massive increase in CRA compliant Freddie and Fannie loans. And of course the FED policy of easy money. There never would have been a Housing Bubble if it weren't for the FED's policies. Add all of that together and you get a mega disaster.
Obama and his merry band of Jack Ass community organizers were suing banks. [video=youtube;Lr1M1T2Y314]http://www.youtube.com/watch?v=Lr1M1T2Y314[/video] Listen at the 2:25 point.
Banks couldnt do that and remain in good standing with the government, unless they made donations to ACORN.....
I say again... You cannot coerce or manipulate "social justice" from lenders then provide them a receptacle in which to discard risks and expect nothing bad to happen. It can't be done. (suggesting progressives may have known all along what would likely happen, and this entire fiasco was a purposefully manipulated way to further harm a capitalist economic system they despise )