Zombie Lee Atwater

by Eric Martin

Kevin Drum reads a piece by Edmund Andrews on one of the recent reappearances of the housing bubble/CRA zombie lies and Kevin gets...shrill.

The evidence is pretty clear on this: CRA had essentially no effect at all on the housing bubble, and Fannie and Freddie can be blamed, at most, for throwing a couple of logs onto a bonfire that Wall Street had touched off long before. Those logs cost them (i.e., you) a helluva lot of money, but they weren't responsible for the financial crisis.

But it's a convenient story for the Sarah Palin wing of the conservative movement, since it deflects blame from the private sector to the public sector, from George Bush to Jimmy Carter and Bill Clinton, and from rich white guys to working class black and brown folks — as the Michael Ramirez cartoon above graphically demonstrates. The only problem is that it's demonstrably not true. Read Andrews's post and follow the links for more.

One of those links in Andrews' post is to a piece by Krugman, with helpful facts and graphics:

Just to repeat the basic facts here:

1. The Community Reinvestment Act of 1977 was irrelevant to the subprime boom, which was overwhelmingly driven by loan originators not subject to the Act.

2. The housing bubble reached its point of maximum inflation in the middle years of the naughties.

3. During those same years, Fannie and Freddie were sidelined by Congressional pressure, and saw a sharp drop in their share of securitization...while securitization by private players surged.

Andrews adds:

What makes this smear so repellant is that it blames poor people — mostly minorities — for bringing on the crisis. But what makes it so maddening is that it’s so demonstrably false. We have reams of evidence that banks and mortgage lenders actively targeted blacks, Hispanics and other immigrant groups for reckless loans. The lenders weren’t forced. They were making a fortune.

Speaking of which:

Camille Thomas, a 40-year-old African-American, loved working for Wells Fargo. “I felt like I could help people,” she recalled over coffee.

As the subprime market heated up, she said, the bank pressure to move more loans — for autos, for furniture, for houses — edged into mania. “It was all about selling your units and getting your bonus,” she said.

Ms. Thomas and three other Wells Fargo employees have given affidavits for the city’s lawsuit against the bank, and their statements about bank practices reinforce one another.

“Your manager would say, ‘Let me see your cold-call list. I want you to concentrate on these ZIP codes,’ and you knew those were African-American neighborhoods,” she recalled. “We were told, ‘Oh, they aren’t so savvy.’ ”

She described tricks of the trade, several of dubious legality. She said supervisors had told employees to white out incomes on loan applications and substitute higher numbers. Agents went “fishing” for customers, mailing live checks to leads. When a homeowner deposited the check, it became a high-interest loan, with a rate of 20 to 29 percent. Then bank agents tried to talk the customer into refinancing, using the house as collateral.

Several state and city regulators have placed Wells Fargo Bank in their cross hairs, and their lawsuits include similar accusations. In Illinois, the state attorney general has accused the bank of marketing high-cost loans to blacks and Latinos while selling lower-cost loans to white borrowers. John P. Relman, the Washington, D.C., lawyer handling the Memphis case, has sued Wells Fargo on behalf of the City of Baltimore, asserting that the bank systematically exploited black borrowers.

Lovely.  But why let facts get in the way of the welfare queens driving cadillacs to pick up t-bone steaks for the young bucks at home.

Comments

[Hogan]

As usual, all our problems are caused by people with no money or power, while the rich and powerful can only stand by, helpless to stop the carnage.

[Eric Martin]

Won't anyone think about the poor, oppressed billionaires!

[Ugh]

As usual, all our problems are caused by people with no money or power, while the rich and powerful can only stand by, helpless to stop the carnage.

Echoes something Glenn Greenwald quoted today from Noam Chomsky:

In one of his many speeches, to U.S. troops in Vietnam, [Lyndon] Johnson said plaintively, "There are three billion people in the world and we have only two hundred million of them. We are outnumbered fifteen to one. If might did make right they would sweep over the United States and take what we have. We have what they want." That is a constant refrain of imperialism. You have your jackboot on someone's neck and they're about to destroy you.

The same is true with any form of oppression. And it's psychologically understandable. If you're crushing and destroying someone, you have to have a reason for it, and it can't be, "I'm a murderous monster." It has to be self-defense. "I'm protecting myself against them. Look what they're doing to me." Oppression gets psychologically inverted; the oppressor is the victim who is defending himself.

[John Thullen]

The next time Lee Atwater is buried, I'd suggest pouring salt in his mouth and sewing his dead lips shut.

His zombie-bitten brothers and sisters Rove the landscape.

[Marty]

This is as nuanced as blaming poor people in the first place. The constant tinkering with CRA and its reporting requirements, along with the changes made to loan requirements by Fannie and Freddie to accomodate them certainly was a major driver of the housing bubble. The facts of this constant tinkering is pretty well explained in the wikipedia article on CRA here .

The impact was greatly reduced income requirements on ALL loans at Fannie and Freddie so middle income and wealthy people could also buy houses they couldn't afford. The banks went on a spree, knowing they could sell crap loans they never could have before.

There is plenty of blame to go around, but the changes in regulations to allow low income people to own a home(a wonderful goal) openeed Pandoras box just in time for the massive influx of money with no place to go after the dot com bust.

In this case, (I suspect because the change came primarily during the Clinton years championed by Barney Frank) we should give the deregulators a pass and just blame the banks?

[Marty]

Just to add, this NYT article from 1999 describes the process in motion.

[Jacob Davies]

Marty, which regulation was it that forced Washington Mutual and Bank of America to make zero-down prime loans or make HELOC loans that left people with zero equity in their houses? Subprime started this, but it was just the leading edge. The number of prime loans in foreclosure now (something like 10%) is a pretty good indicator that entirely aside from subprime the mortgage lenders were happily extending loans that could not possibly be repaid.

It's securitization that triggered the ultra-lax lending period, not government action. Once banks no longer needed to hold the loans they made long-term, their interest in determining whether the recipient was actually able to repay diminished sharply. As you might expect.

From the CRA Wikipedia article you referred us to:

At the FDIC, Chair Sheila Bair delivered remarks noting that the majority of subprime loans originated from lenders not regulated by the CRA, calling it a "scapegoat" and declaring it "NOT guilty."

And again, that's just subprime; prime loans and commercial loans made in that period are also total disaster areas.

(As Atrios is fond of saying, it's also still not over, either.)

[Turbulence]

Marty, I'm curious which econ/finance bloggers you read. I read Marginal Revolution, Calculated Risk, Felix Salmon, Brad Delong and Dean Baker. I don't read every single thing they all post, but a fair bit. Some of these folks are conservative, some are liberals. Most are professors but FS is a bond guy and CR used to run a bank. AFAICT, they all think that your CRA theory is nuts.

My real question is: I've got a stack of whip-smart econ/finance experts telling me that your theory is bunk. Why should I believe you? What experts can you marshal to support your position? I mean, do you really think that your professional qualifications compare favorably with even one of the bloggers I listed above?

[John Thullen]

Well, Marty, I agree there is plenty of blame to go around.

But, "the banks went on a spree, knowing they could sell crap loans they never could have before" is a little like saying John Wayne Gacy went on a spree of killing boys and burying them in his crawlspace after regulations on floppy clown shoes were loosened to encourage merriment -- or Jeffrey Dahmer went on a spree of killing and eating his victims after the FDA liberalized the food pyramid to include more animal protein.

The predatory behavior of the Wells Fargo loan bucket shop and all of the others described above was just that, predatory and criminal.

Fannie Mae and Freddie Mac did not say go out and make crap loans and we'll securitize them. They didn't "incentivize" criminal predatory behavior, any more than the FDA could have incentivized a taste for chicken in Jeffrey Dahmer.

You and I didn't engage in the type of behavior engaged by the "sales forces" of the mortgage and investment banks.

How can that be? How is it that we're immune to all of these incentives offered for shitty behavior?

I guess we were raised right, rather than raised by a predatory business system that looks for every weakness and every advantage and hires people based on their already highly-developed predatory personality instincts, who are trained to lie, cheat, steal from and f8ck their neighbors, not that the neighbors wouldn't do the same thing to us if they got the chance, because that's "business" in Glengarry Ross America.

By the way, Paris Hilton goes on shopping sprees, game-show contestants go on clapping sprees, and Dom Deluise used to go on cupcake and lasagna eating sprees.

Piranhas don't go on eating "sprees", Hitler didn't go on a Jew-burning "spree", and salespeople don't go on coldcalling "sprees", caloo calay.

And, yes, he sighed, there are ethical salespeople who just shrug their shoulders when you say you don't need the $700 undercoating.

[Sebastian]

Doesn't the FannieMae thing have something to say about the regulators though? I thought one of the lessons of it all was that we were supposed to trust the government to regulate such things? But in practice, the government was actively promoting such loans through FannieMae.

And this one you can't blame on Bush, as the pressure which 'sidelined' the Maes came from Republicans and the administration. At the time you still had Democrats like Frank, all the way until the very last moments of the bailout, saying that pressure to keep FannieMae standards was suspect.

[Lewis Carroll]

Yes, Sebastian, you're right, the FannieMae thing does say something about the regulators, just not what you think it says:

"The critics have forgotten that the House passed a GSE reform bill in 2005 that could well have prevented the current crisis, says Mr Oxley, now vice-chairman of Nasdaq.

He fumes about the criticism of his House colleagues. “All the handwringing and bedwetting is going on without remembering how the House stepped up on this,” he says. “What did we get from the White House? We got a one-finger salute.”

The House bill, the 2005 Federal Housing Finance Reform Act, would have created a stronger regulator with new powers to increase capital at Fannie and Freddie, to limit their portfolios and to deal with the possibility of receivership.

Mr Oxley reached out to Barney Frank, then the ranking Democrat on the committee and now its chairman, to secure support on the other side of the aisle. But after winning bipartisan support in the House, where the bill passed by 331 to 90 votes, the legislation lacked a champion in the Senate and faced hostility from the Bush administration."

http://www.ft.com/cms/s/0/8780c35e-7e91-11dd-b1af-000077b07658.html

[Mike Schilling]

The power of the market is astonishing. Create a market for loans that are complete crap, pretty soon they're everywhere.

[Eric Martin]

The constant tinkering with CRA and its reporting requirements, along with the changes made to loan requirements by Fannie and Freddie to accomodate them certainly was a major driver of the housing bubble.

But the facts directly belie this. That was, in fact, NOT a major driver. At all. And yet, conservatives treat it as such for obvious reasons.

There is plenty of blame to go around, but the changes in regulations to allow low income people to own a home(a wonderful goal) openeed Pandoras box just in time for the massive influx of money with no place to go after the dot com bust.

But this didn't actually happen. The huge influx wasn't, in fact, huge. Rather, the effects negligible. Look at Krugman's graphs.

In this case, (I suspect because the change came primarily during the Clinton years championed by Barney Frank) we should give the deregulators a pass and just blame the banks?

See above. Also, Lewis Carrol's link from the ultra-liberal FT.

[El Cid]

If ACORN hadn't forced Jimmy Carter to make banks give all them free houses to the blacks some quarter century later, we wouldn't have had no dang economic crisis.

[Lewis Carroll]

Eric and Mike,

I have no doubt that most conservatives have a theological belief that things like the CRA and Fannie and Freddie were the major causes of the collapse. However, Sebastian isn't *most conservatives*. He's obviously reality-based.

As someone who considers himself open-minded, I was willing at first to believe that these things were the primary drivers that put us in a ditch. But most of what I read about the crisis from people with reputations for being knowledgable, honest and well-informed (mostly on the same blogs that Turbulence mentioned above, and elsewhere) said that these factors were, at most, bit players. Plus the fact that several mortgage brokers have told me that most of the really junky sub-prime stuff couldn't have gotten within 100 miles of CRA or FHA sanctioning because the documentation required for those loans was extremely burdensome. Certainly no NINJA loans need apply. And only one of the top 25 sub-prime lenders were institutins subject to the CRA.

My extensive reading points to these as far more signifant factors leading to our great crash:

1) Securitization created a moral hazard in that the party that was in theory doing due diligence on the origination of loans was not the party that bore the ultimate credit risk in carrying the loan as an asset (as was the case in traditional banking).

2) The rating agencies, either because of incompetence or conflicts of interest, conferred AAA ratings on securities that were nowhere near that actual quality.

3) Easy money policy from the Fed, which kept interest rates very low for a long time, led to a search for yield. Given that the loans that were made at relatively low interest rates, leverage was required to deliver the desired yields. Take this, mix with #5 below, and stand back.

4) The Commodities Trading Futurization Act permitted activities which allowed the fire to spread widely and quickly.

5) The relaxation of capital requirements by the SEC in 2004 allowed the institutions who most traded in RMBS to use far too much leverage, meaning when the market adjusted, the effects were greatly magnified. Fannie and Freddie used too much leverage as well, but as the sub-prime market was really heating up from 2001-2007, they actually LOST market share. Plus, they did not lunge in as far as the investment banks did. See here:

So far those seem to me to be the biggest culprits.

More here: http://www.businessweek.com/investing/insights/blog/archives/2008/09/fannie_mae_and.html

[Marty]

Lewis,

There is no doubt that the massive impact on the overall financial system was due to the extended leverage on these questionable assets. The overleveraging was, however, based on the fundamental assumption that the assets themselves were the most secure assets in our economy, which had been historically true.

There were several factors that changed that, some you note but, the two biggest factors were

1) The lessening of regulation on the requirements for getting the loans in the first place. When the Fannie Mae was chartered with CRA quotas that were continually increased up to a target of all of their loan portfolio the banks were also pushed to extend their portfolios. The practicess they used were not even questionable, they were abhorrent. But they were not only allowed, but encouraged to stretch the envelope to provide these loans. In the 90's the progress in this area was touted by the government as a huge success.

As they saw the profits, in a "good" economy, from these loans they extended the reduced requirements to everything up to and including jumbo mortgages.

2) Financial advisors, along with the mortgage lenders, started to sell mortgages as investment vehicles. There was a fundamental shift from selling a loan that was secure based on income and down payment to selling the most expensive mortgage one could possibly afford. The more expensive the house, the more upside and,after all, tenyears from now you will be able to easily afford this mortgage. I watcheed this phenomenon put my employeess, neighbors and friends into houses that were taking over 60% of their take home just for the mortgage. Then, when the inevitable downturn came, they were once again advised to treat it as a bad investment and walk away.

These two factors made the underlying investments for all of the leverage significantly less secure than mortgages had ever been.

Then all of those other issues kicked in, over leverage, reduced capitalization, ratings agency failures etc.

But, to come full circle, all of those would have been less problematic if we had not systematically reduced the value and security of the underlying mortgages over the late 80's through early 2000's.

Turb,

I don't really know how to answer you other than to say that as a person who worked in banking for most of the 80's and early 90's and watched the financial stress the above points placed on those that lived and worked with me, I believe my conclusions are as valid as any of the people you quoted. YMMV

[Marty]

"up to a target of all of their loan portfolio "

typo

up to a target of 50% all of their loan portfolio

[Sebastian]

on Fannie

I reproduce Paul Krugman’s “econometric” claim above that Fannie and Freddie did not help cause the crisis above (I do not claim the Community Reinvestment Act was a big factor). I respond only because I have received hate mail from his followers. Paul is, of course, a great theoretical Nobel-prize-winning economist, so his attacks must be taken seriously (and I did take his trade theory classes at MIT, in the interest of full disclosure). Unfortunately, much of the “Fannie and Freddie did not contribute to the crisis” battalion makes arguments that have serious holes. Since these arguments are so prevalent they need to be rebutted again and again (the claimed unwillingness to listen to argument can be played on both sides).

The key graph in Paul’s argument is Figure 4. He claims that restrictions on Fannie and Freddie starting in 2004 kept their share of originations of total residential mortgage originations down, even while housing prices inflated. But this is irrelevant to the question. What we care about though is the amount of Fannie and Freddie’s originations in the sub-prime residential mortgages. And from every source I have seen, these took off precisely in 2004. Indeed, as I argue in my book Fault Lines, in the period 2004-2006 these two giants purchased $ 434 billion in sub-prime mortgage-backed securities. A measure of the size of these purchases is that in 2004, they accounted for 44 percent of the market for these securities. Calomiris and Wallison (2008, http://www.aei.org/outlook/28704) argue that Fannie and Freddie’s arms were twisted into doing more of this kind of lending starting in 2004 precisely because Congress had them in a vice because of the scandal.

Fannie and Freddie Mae were trading in more than 40% of the sub-prime securities at the key run-up point.

Unless you think that the sub-prime market was not a big part of the problem, you can't deny that Fannie Mae was a big part of the problem.

[Eric Martin]

Unless you think that the sub-prime market was not a big part of the problem, you can't deny that Fannie Mae was a big part of the problem.

But that's just it!

The subprime market was itself the tip of the iceberg. And the Fannies had a 40% stake in the tip of the iceberg.

That's actually my point, and Krugman's.

[Lewis Carroll]

Plus Eric and Seb, F and F's books actually performed BETTER than the averages:

"According to the firms’ monthly volume summaries, their delinquency rates on single-family mortgages *remain below 1.6 percent as of November 2008*; according to the Mortgage Bankers Association, the overall delinquency rate for that time for the single-family market was 3.93 percent for prime loans, and more than 18 percent for subprime loans. Again, this does not necessarily reflect virtuous management, but rather the fact that the GSEs’ regulator, then the Office of Federal Housing Enterprise Oversight, while often accused of being a weak regulator, actually prevented the firms from engaging in the worst sorts of underwriting behavior. Also quite remarkable is the fact that the delinquency rate for Fannie and Freddie multi-family loans remains at around a basis point.
Among the consequences of this regulation is that the firms lost market share (Figure 1). The pink line in the graph is Fannie and Freddie’s share of mortgage debt outstanding. Note that while it declined sharply from 2002 to 2006, the private label market gained the market share that the GSEs lost. Under the circumstances, it is hard to make the case that the GSEs were the fundamental cause of the mortgage crisis, although many critics would like to think so."

http://real-estate-and-urban.blogspot.com/2009/01/on-gses-again.html

Given that, it seems odd to single out F and F for a large share of the blame. Some, I can see. And as the post says, they definitely did some questionable accounting. But based on performance at least, their underwriting standards were WAY better than the Ameriprises and Countrywides.

Plus, Seb,
"Fannie and Freddie Mae were trading in more than 40% of the sub-prime securities at the key run-up point."
isn't exactly true. Maybe before the key run-up point. But at that point, they started to lose market share:

http://real-estate-and-urban.blogspot.com/2008/09/charles-calomiris-and-peter-wallis.html

[Marty]

I would add the "key run up point" is a complete misnomer. The mortgages in quesstion were sold between yhe early 90's and mid 2000's. The statistical trick of focusing on 2004 on is just that, a trick. The "bad" mortgages collected over a long time and the over leverage and securitization of them happened in the 2000's. Over a reasonably long period of time those assets became less and less secure, the explosion came at the first significant downturn, not because someone suddenly decided the collateralized debt might be suspect. It happened when it became clear the collateral was crap.

[Sebastian]

"The mortgages in quesstion were sold between yhe early 90's and mid 2000's."

I'll need a cite on that. I'm virtually certain that is wrong. My understanding is that the key subprime mortgages in question were written between 2002-2006. It is those mortgages that are the largest plurality of the defaults.

"According to the firms’ monthly volume summaries, their delinquency rates on single-family mortgages *remain below 1.6 percent as of November 2008*; according to the Mortgage Bankers Association, the overall delinquency rate for that time for the single-family market was 3.93 percent for prime loans, and more than 18 percent for subprime loans."

Good heavens the statistical manipulation of that quote is amazingly obvious. We are talking about sub-prime mortgages, of which Fannie showed a huge run up in securitization in the mid 2000s. Not the general single-family market. If the sub prime rate had actually stayed anywhere near 1.6, Fannie wouldn't have gone under.

It did however go under. Right? Can you explain why it went under *using those statistics*? Of course not. Because those statistics aren't useful to determining what went wrong--they are deliberately ignoring the actual problem.

[Sebastian]

I want to make clear what my position is so we don't go off on speculative tangents. It is NOT that FannieMae et al. were the 'prime mover' or 'most important cause' or something. They were clearly an important mover in the markets in question. But the basic problem was a government/private joint venture in screwing things up. Neither side of the government/private equation could have screwed things up so completely without help from the other side.

My point is as to regulation. Government 'oversight' is not the powerful solution that people here seem to think it is when the government is operating under the same screwed up assumptions as the private market.

Governments suck at bubbles for pretty much all the same reasons that private actors do. It would be MUCH better to focus governmental regulation in creating a robust system which handles failure more gracefully than it would be to try to set up systems where governments try to pop bubbles.

The lesson of the GSEs is that the government system shouldn't be trying to pick winners and losers. It should be trying to make sure that when losers lose their shirts, they don't take everyone else down with them.

My problem isn't with regulation, it is with regulation that assumes the government can figure out what is going on much better than everyone else. The GSEs suggest that they don't. So government shouldn't try to take that role.

(And I have no idea how much people on this thread disagree or agree with such a concept. But if we are focusing on GSEs major cause or not, we aren't even looking at a good question. No one bank or entity was *the* major cause. So the answer to the question for any entity is 'no'. But that is because you aren't asking a useful question. A useful question is "Does the malfunction of the GSEs tell us something about how government entities function in the market?")

[Lewis Carroll]

Yes Sebastian, such statistical manipulation there. Certainly nothing as clear and relevant as

"trading in more than 40% of the sub-prime securities at the key run-up point."

What does that even mean? *Trading* in more than 40% of sub-prime securities? And what, pray tell, is the "key run-up point"?

If F and F had such low default rates relative to the market, then obviously it was not their underwriting standards that were lax. Their risk management wasn't ideal, and they were definitely overleveraged, but they were much more victims of the crisis rather than any kind of cause:

"Start with the most basic fact of all: virtually none of the $1.5 trillion of cratering subprime mortgages were backed by Fannie or Freddie. That’s right — most subprime mortgages did not meet Fannie or Freddie’s strict lending standards. All those no money down, no interest for a year, low teaser rate loans? All the loans made without checking a borrower’s income or employment history? All made in the private sector, without any support from Fannie and Freddie.

Look at the numbers. While the credit bubble was peaking from 2003 to 2006, the amount of loans originated by Fannie and Freddie dropped from $2.7 trillion to $1 trillion. Meanwhile, in the private sector, the amount of subprime loans originated jumped to $600 billion from $335 billion and Alt-A loans hit $400 billion from $85 billion in 2003. Fannie and Freddie, which wouldn’t accept crazy floating rate loans, which required income verification and minimum down payments, were left out of the insanity...

There’s a must-read study by staff members of the Federal Reserve Bank of New York analyzing the roots of the subprime crisis that came out in March. I don’t think it got much attention then as the conclusions seemed uncontroversial at the time. But now that Washington politicians are trying to rewrite history, it should be mandatory reading for every American interested in knowing how we got here.

The study identifies five causes of the subprime meltdown:

-Convoluted loan products that consumers didn’t understand.
-Credit ratings that didn’t do a good job highlighting the risks contained in subprime-backed securities.
-Lack of incentives for institutional investors to do their own research (they just relied on the credit ratings).
-Predatory lending and borrowing (which I think means fraud perpetrated by borrowers).
-Significant errors in the models used by credit rating agencies to assess subprime-backed securities.

You’ll note in the Fed’s five causes that there’s some culpability for lenders, borrowers, investors and credit raters. There’s no blame for Freddie Mac or Fannie Mae which had little or nothing to do with the entire situation."

http://www.businessweek.com/investing/insights/blog/archives/2008/09/fannie_mae_and.html

And while I agree that we shouldn't look to government regulation as some kind of infallible suit of armor, it does generally work. Can you name any systemic crisis we had in the financial system in the 40+ years between World War II and the S&L bailouts? There were certainly exogenous things like the 1970s oil shocks, but no waves of bank failures, mass foreclosures and stoppage of credit flow. Do you really think that it's a coincidence that the deregulation that started in the late 70s and took off in the 80s was followed by huge financial displacemnents every 3-5 years?

[Lewis Carroll]

But I do think we agree on much of this, and I would pick out this comment of yours as ringing very true with me:

"The lesson of the GSEs is that the government system shouldn't be trying to pick winners and losers. It should be trying to make sure that when losers lose their shirts, they don't take everyone else down with them."

I personally think that doing things like instituting the Volcker Rule and mandating strict capital requirements thereby severely restricting leverage would, if not prevent future crises, certainly limit their ability to cause systemic problems.

In the case at hand, more restrictive leverage requirements would have had a big effect on the GSEs, which stayed out of the headlines for 30 years as government organizations and then another 30+ years as quasi-gov entities.

[Ginger Yellow]

" Plus the fact that several mortgage brokers have told me that most of the really junky sub-prime stuff couldn't have gotten within 100 miles of CRA or FHA sanctioning because the documentation required for those loans was extremely burdensome"

This is the key point, and it's one of the things that makes this debate so frustrating. The data is there, but hardly anyone seems to look at it. CRA loans performed better than non-CRA subprime loans, and CRA loans were a tiny fraction of total subprime.

There's a debate to be had about the role the CRA had in influencing Fannie and Freddie, and in turn the influence Fannie and Freddie had on the subprime RMBS market, but there is literally no evidence that supports the contention the crisis was caused by lending to poor people or minorities. I'd also add that other some other countries, which had no CRA and no Fannie or Freddie, also had subprime booms and crises - most notably the UK.

See also.