Repeal CRA, stop blackmailing banks

Rep. Jeb Hensarling, R-Texas, has introduced legislation torepeal the 1977 Community Reinvestment Act, a damaging relic fromJimmy Carter's presidency. The CRA empowered left-wing activistgroups like ACORN and the Greenlining Institute to use claims ofracism to force banks and other financial institutions to make loansand mortgages on the basis of the ethnic and demographic makeup ofneighborhoods instead of the creditworthiness of borrowers. At thetime, this tool of political blackmail was cleverly camouflaged byits proponents behind the righteous cause of ending redlining, thepractice in which bankers allegedly drew red lines around certainlocal neighborhoods, putting them off-limits for loans andmortgages. The redlined areas were typically populated by minorityresidents, usually African-Americans or Hispanics.

But the CRA didn't actually ban redlining, it just reversed themoney flow's direction, as decisions on loans and mortgages arestill made on the basis of the ethnic identity of the recipients'neighborhoods. (Ultimately, this approach led banks and commerciallenders to invest massively in subprime mortgages backed by FannieMae and Freddie Mac, which in turn caused the economic meltdown of2008). The CRA gave ACORN, Greenlining and legions of similar groupsleverage to extort loans and mortgages in return for not conductingdevastating PR and political pressure campaigns designed to libeloffending banks and bankers as racists. If federal regulators couldbe convinced that a bank was guilty of racism, it could be preventedfrom acquiring or merging with other banks. The law created apowerful incentive for banks to pay off the activists groups to makethem "go away." When mobsters do the same thing, prosecutors call ita "protection racket." When groups like the Greenlining Institute doit, they call it "social justice." Tori Richards of CaliforniaWatchdog and the Washington Examiner's Mark Tapscott have documentedin a five-part series ending today on page 33 how Greenliningperfected this process.

Aside from the fact CRA created a legalized form of bank robbery,Hensarling points out that in the years since its passage,"interstate banking, branch banking, Internet banking, risk-basedpricing; all have helped revolutionize and democratize credit in oursociety as never before. If you can gain access to the Internet at apublic library, if you can have access to a telephone to call a toll-free number, you can unlock countless credit opportunities that,again, for credit cards and home loans, were simply unavailable 33years ago. Market competition ... now provides low-income Americanswith a platform to access competitive bids and financial productsall across the United States, not just in localized geographiccommunities. In fact, the concept of a localized geographiccommunity for banks is simply antiquated." So is the CRA and itshould be repealed before it causes any more damage to the U.S.economy.