Cynthetiq....to me it comes down to a simple question:
would effective and comprehensive safeguards to protect stockholders aganst future enrons/tycos/worldcoms been implemented voluntarily w/o government regulation?
Aside from Deloit's personal gains, the benefits cited make sense to me, particularly....
increased audit committee involvement and better internal controls over business relationships with other entities
OR....just back to the credit crunch.
More on the Community Reinvestment Act and its impact on the mortgage crisis.
Quote:
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Originally Posted by aceventura3
... The Community Reinvestment Act of 1977, amended in 1995 probably had a bigger impact, and on the sub-prime mess in particular. In the interest of addressing "redlining" problems the legislation requires banks to make loans they would not ordinarily make.
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Or probably not.
A recent study suggest otherwise:
Quote:
Community Reinvestment Act May Have Deterred Risky Mortgage Lending
A Traiger & Hinckley LLP study of 2006 mortgage loan data suggests that the Community Reinvestment Act, a federal law that requires banks to help serve the credit needs of their local communities, including low- and moderate-income neighborhoods, deterred banks from engaging in the kinds of risky lending practices that are provoking the foreclosure crisis.
Compared to other lenders in their communities, banks making loans in their CRA assessment areas (CRA Banks) were less likely to make a high cost loan, charged less for the high cost loans they did make, and were substantially more likely to eschew the secondary market and retain high cost and other loans in portfolio. Foreclosure rates were also lower in metropolitan areas with proportionately greater numbers of bank branches.
"Without the CRA, the foreclosure crisis might have negatively impacted even more borrowers and neighborhoods," stated law firm partner Warren Traiger. "Apparently, the CRA's mandate that banks help serve the credit needs of their local communities consistent with safe and sound banking practices has resulted in CRA Banks making a greater proportion of safe and sound loans than other lenders."
Specifically, the Traiger & Hinckley LLP study found that:-- CRA Banks were 66 percent less likely than other lenders to originate a high cost loan;
-- The average high cost loan made by CRA Banks was priced 68 basis points lower than the average high cost loan originated by other lenders;
-- CRA Banks were more than twice as likely as other lenders to hold originated loans in their portfolio; and
-- The higher a metropolitan area's concentration of bank branches, the lower its foreclosure rate. Conclusion
To a much greater extent than other lenders, CRA Banks avoided making the types of home purchase mortgage loans that provoked the foreclosure crisis. Unfortunately, the law's impact on the subprime crisis was limited because in the 15 metropolitan areas analyzed, the CRA Banks' share of the mortgage market was less than 25 percent.
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