CRA Debacle

Democrats often insist that the Community Reinvestment Act had nothing to do with the sub-prime mortgage crisis and recession. But a new study by the National Bureau of Economic Research found, that the act led to riskier lending by banks.

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

CRA regulations are at the core of Fannie's and Freddie's so-called affordable housing mission. In the early 1990s, a Democrat Congress gave HUD the authority to set and enforce CRA-grade loan quotas at Fannie and Freddie.