The Community Reinvestment Act of 1977 was an early attempt to promote a social agenda in the banking industry. During downturns in the real estate market, the frequency of defaulting loans and the corresponding severity (losses incurred by the lender) increase simultaneously and substantially, so mortgages are inherently risky. Evidently, the current financial crisis has expanded significantly beyond its root cause, mainly due to the finance industry taking advantage of substantial short-term profit opportunities related to creating and underwriting subprime mortgages without an appreciation for their longer term default risk. In addition to the current financial crisis, there are additional repercussions affecting the US economy and the future welfare and standard of living of the American people. For a significant number of years, the US has sustained both a large and increasing negative balance of trade and a government budget deficit. The US must adopt a strategy to have the ability to compete in the global economy while maintaining and improving the living standards of its people.
THE ROOT CAUSE OF THE CURRENT FINANCIAL CRISIS, EFFECTS ON CAPITAL MARKETS, A... Ronald W Spahr Business Perspectives; Spring 2009; 19, 4; Docst
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