Clinton's 1995 housing rules caused the 2008 financial crisis
| Clinton's 1995 housing rules caused the 2008 financial crisis | |
|---|---|
| MISLEADING | |
| "The Clinton administration's 1995 strengthening of the Community Reinvestment Act forced banks to make bad loans that caused the 2008 crisis." | |
| Domain | Economy & Labor |
| Tactic | Statistical & Evidentiary Distortion |
| Era | Historical |
| First seen | 2008 |
| Origin | Commentary after the 2008 crash blaming government housing policy |
| Last reviewed | 2026-10-29 |
| Further reading: books on Economy & Labor | |
The Community Reinvestment Act of 1977 requires federally insured banks to serve the credit needs of all the communities where they take deposits, including low-income neighborhoods. In 1995 the Bill Clinton administration issued new rules focused on banks' actual lending results. After the 2008 crash, some commentators said those rules pushed banks into the subprime loans that blew up.
The data do not support that account. Most subprime loans were made by lenders the law did not cover.
What the evidence shows
- Who made the loans. Federal Reserve research found that only about 6 percent of high-cost loans in 2006 were made by CRA-covered lenders to lower-income borrowers or neighborhoods in their assessment areas.
- Loan performance. Studies found CRA-related loans generally performed better than subprime loans made by independent mortgage companies.
- Investigators' view. The Financial Crisis Inquiry Commission concluded in 2011 that the CRA was not a significant factor in subprime lending or the crisis.
Why it matters
Blaming a law about lending in poor neighborhoods shifts attention from the unregulated mortgage lenders, securitization and leverage that drove the crisis.
Sources
- Financial Crisis Inquiry Commission, The Financial Crisis Inquiry Report, January 2011.
- Randall S. Kroszner, Federal Reserve Governor, "The Community Reinvestment Act and the Recent Mortgage Crisis," speech, December 3, 2008.
- Federal Reserve Bank of San Francisco, Revisiting the CRA: Perspectives on the Future of the Community Reinvestment Act, 2009.