Doing the wrong thing is worse than doing nothing. I trust the free market; I don't trust either Congress or Wall Street experts. The Secretary of the Treasury is a Wall Street guy, not an economist, and is baised. Why would you all trust Bush for anything?

Of course, the Chicago and Austrian schools of economics (and over 266 PhDs in economics) are against the bailout, and these two schools have won more Nobel Prizes in economics than all nations combined, except the USA: “One of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making it unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary. There was no free market in mortgages or finance--these markets were riddled with controls and distortions, courtesy of the Fed, Fannie and Freddie, the CRA, the FDC, and Sarbanes-Oxley. And that lack of a real market was precisely the problem; it induced irrational behavior through dictates, handouts, and bailouts.”

Big Government colluded with quasigovernmental agencies distorting the market, and you all think a couple hundred ignorant congressmen are going to fix the problems caused by Government collusion? Have you seen the stupid looks on their faces? I rather have the Fed alone try to solve the problem than insert Congress at all. Moreover, we should let the market itself correct the imbalance.

Just seconds ago on local radio, the head of the economics department at Arizona State University, said the underlying cause of the crisis is the Community Reinvestment Act (CRA) and this act needs to be repelled first because it encourages loans to unqualified applicants. On CSPAN last night the head economist for the Brookings Institution (a left leaning liberal think tank), said the same thing. The CRA remains untouched by the bailout, so the conditions that caused the crisis remain unchanged.

"Referred to as a kind of financial affirmative action law, CRA requires banks to make loans in the communities from which they draw deposits -- ostensibly ensuring that they extend credit to low income areas. Signed by President Carter in 1977 and toughened by the Clinton Administration in the 1990's, the CRA has been cited by many as a pivotal reason for the people acquiring subprime mortgages who were unable to pay them."

"CRA requires banks to make loans in the communities from which they draw deposits"

Wouldn't that imply that banks in poor communities, which would accumulate only limited deposits, would make only limited loans? I am assuming, of course, that the required investments are keyed to the available deposits.

“I am assuming, of course, that the required investments are keyed to the available deposits.”

No. That was the dilemma: CRA institutions provided unleveraged high-risk loans. Without adequate leverage (without adequate assets/collateral to cover the loans), these CRA organizations flew too low to the ground and financial turbulence (housing devaluation) forced these unleveraged quasigovernmental agencies into failure. No one has addressed the CRA dilemma yet…

So, just how did the supervising agency determine when the loan volume was sufficient?

Are you saying that they weren't taking sufficient risk and that was getting them into trouble? The current problem seems to be banks taking too much risk. Is there a Goldilocks Risk Level?

We agree. Too much risk.

It's easy to say that the poor, innocent bankers were forced to lend money to all those pesky minority groups who don't know how to prudently manage their money. Unfortunately, this talk is just not very well disguised racism. The management of the CRA could have been done with an eye towards strict regulation and accountability, both by Treasury and the Fed.

Instead, there was the Bush economic doctrine of letting the free market do any damn thing it wanted to allowed the Wall Street greed heads to continue to package Ditech mortgages like bad sausages, foisting them off all over the world, and allowing flagrant abuses of lending standards to be violated, all in the name of pushing more profits in the Ponzi scheme that it all was for the bankers.

Don't blame the CRA for the crap we're in now. Blame the Bush administration for its typical failure to attend to growing crises until it's too late.

Just to be clear, the bulk of the bad paper out there was created by institutions that were not required to comply with CRA.