The "CRA Did It" Question

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Barry Ritholtz has always been a reasonably reliable left-oriented guy and he's paid a lot of attention to the "CRA" noise.

Here he tells us about new research into the question.

In brief:

1)  CRA lending did NOT cause more bank losses, nor did it have significantly more defaults/foreclosures.

2)  Mortgage losses (defaults/foreclosures) were generated by third-party brokers, not banks.

When CRA was passed, the Banks fretted--but you cannot find evidence that CRA was the cause of bank failures in the 1976-1985 timeframe, folks.  It ain't there.  You CAN find evidence that large-scale real-estate developments were the cause of many bank failures, particularly after the tax-reform acts of the mid-eighties.  But those were not loans to homeowners.

The problems leading to the '08 bust were almost exclusively generated by mortgage-broker firms (which, admittedly, were often subsidiaries of banks and S&L's.)