I'm Sorry, Your Bank is too Prudent, We're Downgrading Your Rating

Beestie · 03-17-2009, 09:31 PM

Good homework, Pie.

The CRA was instituted to address redlining: a practice where banks would not loan money to purchase properties in certian areas. Turns out these areas had certain demographic similarities.

So, in exchange for Federal benefits such as a reduced capital reserve ratio among other things, banks agreed to make mortgage money more available.

This bank isn't being risk averse, they are up to something else. To have zero money set aside for default risk is utterly shocking. No wonder they got a smackdown. I have a feeling the Fed figured out what else they were up to but couldn't prove it so used the smackdown as a warning shot. A bank that doesn't have a web page? Red flag.

There are many reasons to open a bank. Not all of them involve banking.

03-17-2009, 09:31 PM	#7
Beestie -◊\|≡·∙■·∙≡\|◊- Join Date: Feb 2003 Location: Parts unknown. Posts: 4,081	Good homework, Pie. The CRA was instituted to address redlining: a practice where banks would not loan money to purchase properties in certian areas. Turns out these areas had certain demographic similarities. So, in exchange for Federal benefits such as a reduced capital reserve ratio among other things, banks agreed to make mortgage money more available. This bank isn't being risk averse, they are up to something else. To have zero money set aside for default risk is utterly shocking. No wonder they got a smackdown. I have a feeling the Fed figured out what else they were up to but couldn't prove it so used the smackdown as a warning shot. A bank that doesn't have a web page? Red flag. There are many reasons to open a bank. Not all of them involve banking. __________________ ♠ ♥ ♣ ♦

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