Rep. Barney Frank, Ranking Member of the House Financial Services Committee and Rep. Luis V. Gutierrez, Ranking Member of the Subcommittee on Insurance, Housing, and Community Opportunity, today released the following letter to the Editor of the Chicago Tribune:
To the Editor:
In his February 7, 2011, commentary, "Some of us shouldn't be homeowners", Dennis Byrne attempts to lay the blame for the housing market and Wall Street collapse at the feet of middle-class and working-class homeowners by blaming the financial crisis on the Community Reinvestment Act (CRA). The problem for Byrne is that even conservatives disagree with him. While people may not be surprised that all six Democrats on the Bi-Partisan Financial Services Inquiry Commission disagreed with Byrne's claim that the CRA caused the financial crisis, they may be interested to know that three of the four Republicans on the Commission, including former Republican House Ways and Means Chairman Bill Thomas who was co-chair of the Commission, flatly rejected this assertion. Commissioners Thomas, Keith Hennessy, and Douglas-Holtz-Eagan concluded that "neither the Community Reinvestment Act nor removal of the Glass-Steagall firewall was a significant cause" of the financial crisis. Their findings reinforce the view of many other conservative policymakers. For example, Former Comptroller of the Currency John Dugan noted in a speech on November 19, 2008, that "CRA is not the culprit behind the subprime mortgage crisis, or the broader credit quality issues in the marketplace." And in a speech on December 17, 2008, FDIC Chairman Sheila Bair noted that CRA was not to blame for the current financial storm.
The Community Reinvestment Act (CRA), which became law in 1977, is designed to prevent redlining -- the practice by which in the past some financial institutions have refused to lend to qualified prospective homeowners because of the neighborhood in which they choose to live. The CRA makes sure that whole neighborhoods, races, ethnicities, and classes are not excluded from financial markets and has been tremendously successful in making sure that the dream of owning a home or a business is not arbitrarily denied to qualified borrowers.
Only a handful of the top subprime lenders at the heart of the mortgage crisis were federally regulated financial institutions governed by CRA and such institutions did not, for the most part, engage in the shady lending practices that fueled the foreclosure epidemic and subsequent economic meltdown. Trying to divert blame for the economic crisis away from Wall Street in order to justify giving the actual culprits a free pass is simply not the way to avoid another crisis in the future.
Rep. Barney Frank (D-MA) and Rep. Luis V. Gutierrez (D-IL) are Democrats on the House Committee on Financial Services and served as Chairman and Subcommittee Chairman, respectively, on the Committee in the 111th Congress that passed the Dodd-Frank Wall Street Reform Bill.