New Study Finds Community Reinvestment Act Led To Mortgage Meltdown And Financial Crisis


Remember this the next time you hear some Democrat blather about how Republican economic policies led to the 2008 financial crisis.

Democrats and the media insist the Community Reinvestment Act, the anti-redlining law beefed up by President Clinton, had nothing to do with the subprime mortgage crisis and recession.

But a new study by the respected National Bureau of Economic Research finds, “Yes, it did. We find that adherence to that act led to riskier lending by banks.”

Added NBER: “There is a clear pattern of increased defaults for loans made by these banks in quarters around the (CRA) exam. Moreover, the effects are larger for loans made within CRA tracts,” or predominantly low-income and minority areas.

To satisfy CRA examiners, “flexible” lending by large banks rose an average 5% and those loans defaulted about 15% more often, the 43-page study found.

The strongest link between CRA lending and defaults took place in the runup to the crisis — 2004 to 2006 — when banks rapidly sold CRA mortgages for securitization by Fannie Mae and Freddie Mac and Wall Street.

Read the whole thing.

Oh, and President Obama may not have been a legislator at the time, but he played his own part in creating the mess, as Gateway Pundit noted:

In his early activist days, Barack Obama the community organizer sued banks to ease lending practices.

Republicans constantly warned about the perils of the CRA, but Democrats refused to even admit there was a problem.

They create these crises, then blame everyone else, and the voters buy it thanks to the media and then they double down on their reckless policies.

This is their legacy: