This is an informative video and the music is great too... http://www.youtube.com/watch?v=H5tZc8oH--o
It does not make sense to me still how the ( CRA - Community Reinvestment Act) is to blame. I see the CRA as something that was exploited for profit, but not the one to blame. Ok, CRA was created to help low income peoples to buy a home, and help small business to get loans. The first bank to do this was Bear Stearn. But what is important to know is that Bear Stearn was allowed to bundle these loans and sell for a profit. ( Asset backed securities) That means Bear Stearns did not have to have worry about the capital on their books vs the debt they have because they can sell their debt, make profit, and still have enough capital on their books to keep thier risk ratio down. So they make money NOT from just deposits, but other securities they sell. So this CRA was opportunity for Bear Stearns to make many,many subprime loans with no checking the creditworthyness of the poorer borrowers. The credit worthyness if its borrowers did not matter at all. The CRA was an opportunity to exploit morgage lending for profit with NO RISK to the lender (bear stearns) because bear stearn bundled the morgages and sold for a profit ...now someone else have the risk, and bear stearn is richer. So it seems to me this is greed by lenders that started this. Some say banks were forced to make subprime loan becasue of CRA , but it look like to me the opposite. If bear stearn felt subprime was so risky, and felt they were forced to make subprime loans because of the CRA, then why did bear stearns make HUGE amount of these loans? And countrywide too. If they felt forced to do this by CRA, and they did not like the risk of subprime loans, then why make so many and "corner the market" on these loans? Bearn stearn and countrywide, and other banks could just make some of these subprime loans, but they did not. They made a big effort to make HUGE amount of these loans. What I see is the lender (like bear stearn) had no worrys about lending to risky poor people with no credit, becasue the risk did not stay on their books. Not only not stay on their books, but they made huge amount of money on these loans. They WELCOME these loans at one time. They "cornered the market" with intention to make big money, and they did make big money. But now people want to say CRA forced them to do this? This makes no sense.