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The Subprime Crisis: Is Government Housing Policy to Blame?

Robert B. Avery1,2; Kenneth P. Brevoort1,2

1 Federal Reserve · 2 Federal Reserve Board of Governors

The Review of Economics and Statistics 2015 open access

Some have suggested that housing policy, embodied by the Community Reinvestment Act (CRA) and affordable housing goals of the government-sponsored enterprises (GSEs), caused the subprime crisis. We examine if these programs led to worse mortgage outcomes using two approaches. The first examines whether more activity by CRA-covered lenders, or more loan sales to the GSEs, was associated with worse outcomes. The second uses regression discontinuity to determine if outcomes were worse at the geographic thresholds used by each program. Our results suggest that neither program played a significant role in the subprime crisis.

DOI
10.1162/rest_a_00491
Volume
97 (2)
Pages
352-363
Language
en
Export
BibTeX
Sources
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