Bloomberg Disagrees With Criticism of the Community Reinvestment Act

Michael Bloomberg was in the Bedford Stuyvesant section of Brooklyn this morning, announcing $2.3 million in grants for nonprofit groups that help New Yorkers stave off home foreclosures.

At the press event, he was asked to react to a point raised in a New York Times op-ed criticizing the government for pushing lenders to give home loans to people who couldn’t pay them back. The push came in the form of the Community Reinvestment Act, argues the article’s author Howard Husock of the Manhattan Institute.

Bloomberg defended the goal of expanding homeownership to as many people as is feasible.

“Well, I think it’s been general consensus for an awful long time that homeownership is part of the great American dream,” said Bloomberg. He said “we all benefit, the more people that own their own homes, they tend to take care of their neighborhoods, they give to people in the construction industry” and even “their kids are better students.”

He then said that despite home foreclosures hitting a number of people with subprime mortgages, “it’s also true that an awful lot of people who got homes through these program who otherwise never would have, and they continue to service their mortgages, and they continue to add to the community.”

“The vast preponderance of people that got mortgages with looser standards than we’ve had before are still current and will stay current,” said Bloomberg.

Commissioner Shaun Donovan then stepped up to the podium to add some numbers behind Bloomberg’s position. Donovan said that as many as 75 percent of the subprime loans made in the country were lent by financial institutions that don’t fall under the auspices of the C.R.A.

“So, just to be clear, the idea that C.R.A. the Community Reinvestment Act, caused the sub-prime crisis, the numbers just don’t match up,” he said.