Consumer Law

A Bit More on Blaiming the CRA

By Jeff Sovern

A couple of weeks ago Alan had a thoughtful post here about  the ridiculous claims that the subprime crisis was caused by the Community Reinvestment Act.  I've been meaning to pile on.  One of the arguments critics of the CRA made before the meltdown occurred was that the CRA was unnecessary because lenders are eager to lend to CRA-eligible borrowers.  See Jeffery W. Gunther, Kelly Klemme and Kenneth J. Robinson, Redlining or Red Herring, Southwest Econ., May/June 1999.  So the CRA is unnecessary because lenders would want to lend to subprime borrowers even in its absence, but the CRA caused the crisis because without it, lenders wouldn't have made the loans that got into trouble! 

Full post as published by CL&P Blog on October 03, 2008 (boomark / email).