Even after most acknowledge (most meaning those with some common sense) that the CRA was one major component of our financial meltdown we still get examples of our government cracking down on those banks who didn’t buy into the CRA baloney and actually STILL make a profit because of that stance:
…here comes this fantastic story, courtesy of the Boston Business Journal, about East Bridgewater Savings in Boston:
Bad or delinquent loans? Zero. Foreclosures? None. Money set aside in 2008 for anticipated loan losses? Nothing. … The bank even squeaked out a profit of $87,000. And its Tier 1 risk-based capital ratio was 31.6 percent, or more than three times higher than many community banks in Massachusetts. “We’re paranoid about credit quality,” Petrucelli said. The 62-year-old chief executive has run the bank since 1992.
Yet the FDIC has turned up the heat on Petrucelli’s bank, giving it an apparently rare “needs to improve rating,” for not making more risky loans under the Community Reinvestment Act. Here is how the FDIC puts it: “There are no apparent financial or legal impediments that would limit the bank’s ability to help meet the credit needs of its assessment area. The FDIC examiners also faulted East Bridgewater “for not advertising and marketing its loan products enough. The bank, which does not have a Web site, offers fixed-rate mortgages.”
“Paranoid about credit quality.”
If more of financial institutions had felt the same way, or were not so heavily penalized because they did run their business the same way, we would not be in hole we are in. Sure, we may still have been in a hole because there were plenty of other factors involved, or as Mataharley termed it….“The Perfect Storm”….but that hole is deeper then it ever should of been because of the CRA.