Discussion with Paul Volcker; video

[deejayoh]

[TJ_98370]

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Compiled by Traiger & Hinckley, a New York-based law firm:
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Summary Conclusions:
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Our study concludes that CRA Banks were substantially less likely than other lenders to make the kinds of risky home purchase loans that helped fuel the foreclosure crisis.....
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[TJ_98370]

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An interesting and relevant NYT article is linked below. Mr. Wallison was certainly prophetic -
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By STEVEN A. HOLMES
Published: September 30, 1999

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders......
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......Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
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In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers......
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.......In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
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''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''......
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[deejayoh]

[sniglet]

[TJ_98370]

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.....Would more regulation have reduced the number of bad loans made? Most likely, more regulation would have increased the problem......
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Sniglet – The above quote is from the article you linked, of which the author has it exactly backwards IMO.
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The way I interpret the situation is that the OFHEO / FM's were pressured by various financial institutions and political influences to deviate from existing policy and "regulations". The FM's were operating responsibly until popular pressure compelled the adoption of loosened standards.
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Also, the initiative relaxing Fannie / Freddie capital requirements from 30% to 20% was implemented in March 2008, a bit late to have been a causative factor of the real estate bubble.
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