Simultaneously, The Community Reinvestment Act (Cra) Of
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 on Helpwriting.net ...
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,