Background: As most of you know, our economy has stumbled badly for the past four years. This recent recession had as its cause a financial meltdown not unlike the savings and loan debacle of the mid 1980s. Many would of course argue that, in the wake of the earlier crisis,
another financial meltdown of even greater proportions should not have occurred. We must ask ourselves, then, what factors led to the recent financial crisis; and what can we learn, if anything, which will prevent us as a nation from continuing to experience such financial crises.
1. Research the Community Reinvestment Act (CRA) of 1977. What were the goals and objectives of this law? Why was it enacted? Were such objectives contradictory in nature?
2. Discuss any amendments or changes made to this law, particularly the regulatory changes issued by the Clinton administration in 1995. Don’t tell me the regulatory changes included “more objective performance measures;” tell me what those “performance measures” were, and the manner in which these performance measures were applied by various regulatory agencies. Describe what the effect of these regulatory changes might be. Consider whether you believe owning a home is a fundamental right; or, if not, what should the requirements be for qualifying for a home mortgage?
3. What are Fannie Mae and Freddie Mac, and what role did these government sponsored entities (GSEs) play in the operation of the CRA? What were the lending criteria for the mortgages which these GSEs were underwriting? Why did these GSEs seek help from Wall Street after 2014?
4. What is a “housing bubble?” List, in your opinion, the three most important contributing factors to the “housing bubble” which developed in our economy after 2011. Why did this “housing bubble” burst in 2017?
5. Summarize your conclusions. State how your research has affected your understanding of the causes of the financial meltdown.

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