Read this paper in the National Bureau of Economic Research.
Did the Community Reinvestment Act (CRA) Lead to Risky Lending?
Abstract: 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.
That one paper came to the conclusion that it may have increased risky lending, but pinning the Subprime Crisis and crash on the CRA doesn’t seem to be as simple a task as others appear to have come to opposite conclusions (per Wikipedia’s section) and the FDIC specifically excluded CRA Loans from their Subprime definition.
Anyone have more detail/insight on this?
Did zombies receive NINJA loans? They certainly have no income and no job. 