◼ Clinton Added Teeth To CRA, Obama Turned Them Into Fangs - IBD
Through executive orders, Clinton set strict numerical lending targets for banks in "underserved" neighborhoods, while ordering regulators to crack down on alleged bank redlining.
The new rules for the first time mandated that banks use "innovative" or "flexible underwriting practices." Compliance required banks to pass a heavily weighted "lending test" or suffer holds on expansion plans.
The CRA overhaul "has been a disaster," said ex-BB&T CEO John Allison in his recent book on the financial crisis. He argued it's forced "banks to participate in making high-risk housing loans to low-income buyers who would not meet traditional bank lending standards."
Added Allison, who now heads the Cato Institute: "The default rates on these low-income loans are extraordinarily high."
..."DOJ wants banks to have a physical presence in the inner city," Washington-based Buckley Sandler LLP recently told clients, adding that "banks should carefully monitor loan data to determine whether an appropriate volume of loan originations emanate from minority areas."
