Simultaneously, The Community Reinvestment Act (Cra) Of

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Simultaneously, the Community Reinvestment Act (CRA) of 1977 was forcing banks “to make loans to low-income borrowers, especially minorities and particularly African Americans, with a focus on home loans...In order to make acquisitions, open branches, and generally grow its business, a bank must have a satisfactory CRA rating” (Allison, 2013, pp. 55-6). This essentially forced banks to make riskier loans than they otherwise would have. The situation in the early 1990s through 2007 was loan originators making riskier loans to lower income people under CRA guidelines and enforcement, and GSEs needing to meet government mandated quotas of holding such loans. This inevitably led to loan originators like Countrywide using “the ‘originate and …show more content…

When these mortgages failed in unprecedented numbers in 2008...they weakened all financial institutions and caused the financial crisis. In conjunction with the aforementioned weakening of the ratings and the lowering of loan loss reserves by the SEC, both misleading investors and analysts, this is not a healthy financial situation. Ethically, these actions by government agencies created a short term versus long term paradox in which marketplace actors, including the government itself, had to participate. As Albert Mohler says, “the government is, like it or not, one of the actors in this economic system.” Cafferky states that “This tension refers to the fact that organizational leaders must at the same time make decisions that solve present problems or address the current issues and make decisions that affect themselves and the company in the long run” (2015, p. 65). Fundamentally, these housing policies, and reactions to them, were motivated by egoism and pragmatism. It is a noble goal to try to increase the homeownership rate, especially among the most vulnerable in society. A home provides a sense of pride, accomplishment, and legitimacy in a community. Personally, after living in apartments my whole adult life I have a strong desire for a home, a “place of my own,” and am tempted to feel the opposites of pride, accomplishment, and legitimacy. However, when government ignores the “mutual interdependence with one another” (Cafferky, 2015,

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