Again, The CRA Did NOT Cause the Crash!

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Via The Dish:

Barry Ritholtz posts the compelling argument that if the Community Reinvestment Act (CRA) was a prime factor in the subprime mortgage crisis, why did the majority of defaults happen in areas not usually served by CRA loans?

Examining the big lie: How the facts of the economic crisis stack up

For example, if the CRA was to blame, the housing boom would have been in CRA regions; it would have made places such as Harlem and South Philly and Compton and inner Washington the primary locales of the run up and collapse. Further, the default rates in these areas should have been worse than other regions…What occurred was the exact opposite: The suburbs boomed and busted and went into foreclosure in much greater numbers than inner cities. The tiny suburbs and exurbs of South Florida and California and Las Vegas and Arizona were the big boomtowns, not the low-income regions. The redlined areas the CRA address missed much of the boom; places that busted had nothing to do with the CRA.

Michael Bloomberg recently revived this big lie by pinning the blame on Fannie and Freddie to draw attention away from his masters on Wall Street.

But the meme that the big bad government forcing innocent huge banks to loan to poor minorities was the central cause of the collapse is completely unsupported by the facts.

It’s a lie.

-Chris

Related articles

• Bloomberg: Don’t Blame Banks for Mortgage Crisis (outsidethebeltway.com)
• What Caused the Crash? (andrewsullivan.thedailybeast.com)

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