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the Function of the Community Reinvestment Act on the 2007 Housing Bubble Collapse

Assignment id 1007156
Discipline Arts Entertainment
Assignment type Essay
Words 1031
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The Function of the Community Reinvestment Act on the 2007 Housing Bubble Collapse The reality of the worst fiscal crisis in the previous 80 years has led to wide speculation of its own causes. Even though a myriad of theories are offered, none have been as persistent and as patently false since the assertion that the Community Reinvestment Act of 1977 played a substantial role in the housing bubble collapse. Critics of the Community Investment Act (CRA) argue that by forcing banks to meet up with the credit requirements of low-income borrowers, the law compelled lending institutions to accept riskier loans that proved to be financially irresponsible. Even the securitization and speculation of all the very low quality loans caused the housing bubble collapse and the wider financial catastrophe. This debate is subject to several issues, specifically: that the CRA never fared reduced lending criteria, the CRA was commissioned within a quarter of a century prior to the housing crash happened, not one of the countless banks that failed were subject to CRA laws, CRA loans needed a historically low level of default, and also CRA loans comprised a very low amount of subprime loans throughout the appropriate period of the catastrophe. While the CRA may have played some small role in the collapse of the housing bubble and subsequent financial crisis, it is clear that its effect was negligible. There are simply too many mitigating factors that limit the extent to which that the CRA could have negatively affected the home market for the concept to be plausible. The Community Reinvestment Act is a United States federal law passed in 1977 devised to promote lending by depository institutions in non- and - moderate-income places. The legislation was largely designed to combat redlining, a clinic of systema...

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