The Community Reinvestment Act’s role in the housing bubble

The Competitive Enterprise Institute’s Hans Bader writes here about a new paper from the National Bureau of Economic Research that forcefully says (unusually so in academic papers) that the CRA played a major role in pushing lending institutions to write mortgages they otherwise would not have. Bader’s article also goes into the many other ways in which the federal bureaucracy eroded the traditional lending standards, and why we should expect this foolishness to continue.

In the first few years after the financial debacle brought about by the housing bubble, defenders of the mega-state kept trying to argue that it was all due to greed on Wall Street and a lack of sufficient regulation. I would say that the “Washington is innocent — blame the free market” line is thoroughly debunked.

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