Did the Community Reinvestment Act (CRA) Lead to Risky Lending?

Sumit Agarwal et al., National Bureau of Economic Research, December 2012


Yes, it did. We use exogenous variation in banks’ incentives to conform to the standards of the Community Reinvestment Act (CRA) around regulatory exam dates to trace out the effect of the CRA on lending activity. Our empirical strategy compares lending behavior of banks undergoing CRA exams within a given census tract in a given month to the behavior of banks operating in the same census tract-month that do not face these exams. We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks. The effects are strongest during the time period when the market for private securitization was booming.

[Editor’s Note: Previous studies have contradicted this view, so this paper is particularly significant. In the full version of the paper (available with an institution download at the original article link below), the authors note that the above estimates are lower bounds to the actual impact of the CRA.]

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  • You Are Now Enriched

    CRA was just one weapon in the Fedgov’s war on White privilege. It was a much bigger weapon than anyone realized. None of us belive that America will ever bounce back to prosperity, and if true, then minority empowerment became the final nail…

    You can have a first world country or you can have Diversity. We got Diversity.

    BRA all up en heeah, u kno whu’m say’n?

    • Joseph

      Well, it was a “twofer”: they brought down white privilege by “diversifying” the neighborhoods of the producers and helped consolidate wealth in the hands of the international bankers.

  • I cannot believe this is even a question. Are Americans so brainwashed by the Left’s propaganda that they are not clear on the causes of such a massive financial collapse that happened right before our eyes?

    One of the best smoking guns for the collapse comes from this youtube of a CSPAN broadcast of a hearing over the looming problems at Fannie Mae. Pay attention to the race of the players, when told Fannie Mae was in trouble, all the black congressmen are on the same page.


    As if that is not enough, democrats wanted to expand the CRA in 2009


  • The CRA was passed in 1977(!!) so it’s somewhat disingenuous to claim that CRA was the sole cause of the subprime mortgage disaster. Why did it take 30 years for it to happen?

    No, it was housing policies under both the Clinton and Bush administrations. Here’s some links on the role the Decider guy play in it:

    1. Video highlights of Bush speech on homeownership:


    2. Link to the entire speech:
    June 17, 2002

    President Calls for Expanding Opportunities to Home Ownership
    Remarks by the President on Homeownership
    St. Paul AME Church
    Atlanta, Georgia


    3. White House position papers:

    A Home Of Your Own:
    Expanding Opportunities for All Americans


    • Not disingenuous. The 1965 immigration act didn’t result in America becoming majority non-white in 1966, it took time to do its damage. And it was amended and loosened even further several times since then. Same for the CRA.

      I will admit that the straw that stirred the drink in our current housing problems is Bush 43’s fulfilled demand for no down payment mortgages because of the “racism” of down payment requirements.

    • Flytrap

      Of course Bush and Clinton had a role in the debacle, no one is saying otherwise. Bush’s idea of an “ownership society” sounds like a good one. Who generally keeps things up better, renters or owners? Irrespective of the CRA, striving for an ownership society is a noble goal in my opinion. The only problem is it generally works better as melanin levels decrease.

      • Ed_NY

        I have never seen black homeowners take pride in ownership of their homes. They just do not maintain or reinvest in their homes like Whites do. It is the same where ever you go. Give blacks an intact country, city, school, house, infrastructure or anything else and they fail to maintain it. No upkeep, no pride of ownership, everything just deteriorates until it is worthless.

    • if you did a little research, you would know that it was Clinton who revised the CRA twice, and then vigorously enforced it. Clinton also enlisted Jack Johnson, then the new CEO of Fannie Mae to go along with his housing scheme. It was essential to get Fannie mae to lower their standards for the quality of mortgages they would buy from banks. Pre Clinton there were only $200 billion worth of CRA mortgages issued, once Clinton took office, there were over $4 trillion dollars worth of CRA mortgages issued. The financial collapse has 2 components, first is the housing bubble, driven by the flood of new home buyers and the speculators who were able to buy multiple homes due to the CRA inspired lax mortgage standards, The 2nd component is when home buyers defaulted on their mortgages, causing those who bought the mortgages to lose their investments.

    • StillModerated

      Bush the Decider! I’ve not read that in several years. Good source!

  • Flytrap

    Everyone needs to bookmark and save the original article for use in debates in the future. It’s the first research I have seen that leftists won’t argue about the source or funding when seeing the source of the information.

  • rebelcelt

    The blacks will not be happy till we give them homes. Good homes in good neighborhoods nonetheless. Then they will destroy them and want us to repair them and sell them then want us to buy them another when the mismanaged money is gone.