Letter to the Editor of the Boston Globe: Government (in)action
JACOBY’S CLAIM that the current subprime mortgage meltdown is the result of the Community Reinvestment Act, a law passed in 1977 and underenforced by the Bush administration, is absurd on its face. In fact, the CRA encourages only responsible lending in low- and moderate-income communities, and banks covered by the law accounted for only 1.6 percent of all subprime mortgage loans in Massachusetts in 2006.
The real problem with the CRA is that it has not applied to the out-of-state banks and independent mortgage companies that account for a majority of total lending in the state, including almost all of the subprime lending.
Fortunately, our Legislature and governor, guided by the facts on the ground rather than by free-market ideology, decided last fall to extend CRA-like obligations to the licensed mortgage lenders responsible for the bulk of subprime loans in Massachusetts. They recognized that markets require well-designed regulation in order to function efficiently and fairly.
Americans for Fairness in Lending