The Community Reinvestment Act of 1977 authorized federal regulators to “Encourage†lending institutions to “help meet the credit needs of the local communities in which they are chartered.†Now that may sound like a pretty good thing, but think about the underlying principal: that a politician knows better than lending intuitions who should (and shouldn’t) receive a home loan. What sense does that make? Shouldn’t a loan be made based on credit history, income, and savings? Wouldn’t the bank be in a better position to decide if the potential buyer can afford the loan? And shouldn’t the bank, not the government, decide if the borrower was worth the risk?
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The Community Reinvestment Act of 1977 authorized federal regulators to “Encourage†lending institutions to “help meet the credit needs of the local communities in which they are chartered.†Now that may sound like a pretty good thing, but think about the underlying principal: that a politician knows better than lending intuitions who should (and shouldn’t) receive a home loan. What sense does that make? Shouldn’t a loan be made based on credit history, income, and savings? Wouldn’t the bank be in a better position to decide if the potential buyer can afford the loan? And shouldn’t the bank, not the government, decide if the borrower was worth the risk?
http://freedomredux.com/freedomredux-blog/when-government-helps-us/182/