2. Criticism: In Congressional debate on the Act, critics charged that the law would distort credit markets, create unnecessary government regulation and lead to unsound lending.

3. Congress directs the banking regulatory agencies to ensure that banks and savings and loans serve the credit needs of their local communities in a safe and sound manner....With little detail of how banks were expected to meet their new quotas.

7. This law greatly increased the ability of community organizers and advocacy groups, to access banks records, there by influencing the lending policies of banks....Backed up by the threat of lawsuits limiting expansion by banks if they did'nt comply. 

10. With the subsequent surge in bank mergers and acquisitions advocacy groups increasingly protested bank applications on CRA grounds. Agencies began to hold public hearings to allow community involvement. In response to public pressure many institutions established separate business units and corporations to facilitate CRA lending.

 11. In July 1993, President Clinton asked regulators to reform the CRA in order to reduce paperwork and reward performance.  Helping to ease the the credit and income requirements to people with poor credit and limited income! 

12. The CRA regulations were substantially revised according to neighborhood, income, and race; encouraging community groups to complain to banks when they did not meet their CRA obligations; allowing community groups that marketed sub prime loans to low income people to collect a fee from the banks just like other loan marketers

13. The U.S. Department of Housing and Urban Development's mortgage policies fueled the trend towards issuing risky loans. In 1995, Fannie Mae and Freddie Mac began receiving affordable housing credit for purchasing mortgage backed securities which included loans to low income borrowers.

14. This resulted in the agencies purchasing sub prime securities. Sub prime mortgage loans surged by 25% per year between 1994 and 2003, resulting in a nearly ten-fold increase these loans in just nine years. As of November 2007 Fannie Mae held a total of $55.9 billion of sup rime securities and $324.7 billion of Alt-A securities in their portfolios. As of the 2008 Freddie Mac had $190 billion in Alt-A mortgages. Together they have more than half of the $1 trillion in sub prime mortgages.

14. During March 1995 congressional hearings William A. Niskanen, chair of the Cato Institute, criticized political favoritism in allocating credit and that there was no assurance that banks would not be expected to operate at a loss. He predicted they would be very costly to the economy and banking system, and that the primary long term effect would be to harm and contract the banking system. He recommended Congress repeal the Act.

15. In 1997, First Union Capital Markets and Bear, Stearns & Co launched the first publicly available securitization of CRA loans, issuing $384.6 million of such securities.

16. In 1999 the Congress enacted and President Clinton signed into law the Gramm-Leach-Bliley Act, also known as the "Financial Services Modernization Act," which repealed the part of the Glass-Steagall Act prohibiting a bank from offering a full range of investment, commercial banking, and insurance services.

17. The bill was killed in 1998 because Senator Phil Gramm

18. Senator Phil Gramm wanted the bill to expand the number of banks which no longer would be covered by the CRA. He also demanded full disclosure of any financial deals which community groups had with banks, accusing such groups of "extortion.

19. The Clinton administration wanted to prevent banks from expanding into insurance or securities unless they were compliant with the CRA.

20. In 1999 Democratic Senators Christopher Dodd and Charles E. Schumer broke another deadlock by forcing a compromise between Gramm and the Clinton administration which wanted to prevent banks from expanding into insurance or securities unless they were compliant with the CRA

21. On signing the Gramm-Leach-Bliley Act, President Clinton said that it, "establishes the principles that, as we expand the powers of banks, we will expand the reach of the Community Reinvestment Act".

22. A study by the Joint Center for Housing Studies at Harvard University, that found that "data for 1993 through 2000 show home purchase lending to low and moderate-income people living in low and moderate income neighborhoods grew by 94 percent more than in any of the other income categories.  A September 30, 1999 New York Times article stated, "... the Fannie Mae Corporation is easing the credit requirements on loans... The action... will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough... Fannie Mae... has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people... borrowers whose incomes, credit ratings and savings are not good enough... Fannie Mae is taking on significantly more risk... the government-subsidized corporation may run into trouble... prompting a government rescue... the move is intended in part to increase the number of... home owners who tend to have worse credit ratings..."

 23. Between 2000 and 2002 Fannie Mae securitized $394 billion in CRA loans with $20 billion going to securitized mortgages. In 2000, in order to expand the secondary market for affordable community-based mortgages and to increase liquidity for CRA-eligible loans, Fannie Mae committed to purchase and securitize $2 billion of My Community Mortgage loans. In 2007 Ben Bernanke suggested further increasing the presence of Sallie Mae and Freddie Mac in the affordable housing market to help banks fulfill their CRA obligations by providing them with more opportunities securitize CRA-related loans.

24. In an article for the New York Post, economist Stan Liebowitz wrote that the CRA encouraged a loosening of lending standards throughout the banking industry despite warnings of default. Banks were allowed to loan to consumers who were not credit worthy with "no verification of income or assets; little consideration of the applicant's ability to make payments; no down payment." According to Liebowitz, the chief executive of Countrywide Financial said that in order to approve minority applications, "lenders have had to stretch the rules a bit."

The concern from advocacy groups like acorn was centered around balloon mortgages a type of mortgage where the full balance of the mortgage could be called in after a period of time defined by the mortgage contract. As well as adjustable rate mortgages, where the interest rate is fixed for a period of time and then can rapidly go up causing substantial increase in payments. These kinds of mortgages were intended to give a potential client with a poor credit history and limited income an opportunity to buy a home giving them a 2 or 3 year period of time to clean up their credit and take advantage of expanding property values. Because the possibility of default was much higher the risk to lenders was offset by higher rates and less favorable terms. Creating a shared risk between borrowers and lenders.

27. Congressman Ron Paul, who serves on the United States House Committee on Financial Services, partially attributed the current economic downturn to the Community Reinvestment Act, charging it with "forcing banks to lend to people who normally would be rejected as bad credit risks.

28. Economist Russell Roberts blamed the combined effects of excessive Federal Reserve credit expansion, the CRA, the implied guarantee to Fannie Mae and Freddie Mac, the Taxpayer Relief Act of 1997, and other policies for causing the crisis.

29. Federal Reserve chair Ben Bernanke has stated that an underlying assumption of the CRA that more lending equals better outcomes for local communities may not always be true. However, he also notes that at least in some instances, the CRA has served as a catalyst, inducing banks to enter under served markets that they might otherwise have ignored

      In his statement before the same hearing, New York University Professor of Economics Larry White stated that regulator efforts to lean on “ banks in vague and subjective ways to make loans is an inappropriate instrument for achieving those goals.”

29. In 2002 Kathleen C. Engel and Patricia A. McCoy published a study of the predatory lending implications of the CRA, noting that by the late 1990s, predatory high cost mortgages to “gullible borrowers” were leading to foreclosures against low-income people of color and the elderly. They found evidence of such lending practices by CRA covered banks, both directly in their own lending and indirectly in buying other parties’ predatory loans as investments or to help them obtain CRA compliance credit.

30. Gerald P. O'Driscoll former vice president at the Federal Reserve Bank of Dallas stated that Fannie Mae and Freddie Mac had become classic examples of crony capitalism. Government backing let Fannie and Freddie dominate the mortgage-underwriting. "The politicians created the mortgage giants, which then returned some of the profits to politicians sometimes directly, as campaign funds; sometimes as "contributions" to favored constituents.