The Fed today released a paper in its Finance and Economics Discussion Series that looks into whether the subprime bubble was caused by the Community Reinvestment Act, which requires banks to lend to lower-income borrowers, or by Fannie and Freddie lowering credit standards for low-income borrowers. Short answer: no.
We find little evidence that either the CRA or the GSE goals played a significant role in the subprime crisis. Our lender tests indicate that areas disproportionately served by lenders covered by the CRA experienced lower delinquency rates and less risky lending. Similarly, the threshold tests show no evidence that either program had a significantly negative effect on outcomes.
It's a neat paper though it's suggestive more than probative - as the researchers admit, they can't prove much about the performance of Community Reinvestment Act or Fannie/Freddie loans without data on those loans, which are not public. Instead, they draw conclusions based on the prevalence of CRA lenders in individual census tracts, and based on performance of loans just above and just below cutoffs for GSE and CRA eligibility. So it doesn't let Barney Frank completely off the hook, and it carries a disclaimer that "[t]he analysis and conclusions set forth are those of the authors and do not indicate concurrence by other members of the research staﬀ or the Board of Governors," but still - will this be enough to provoke Rick Perry to put his treason-huntin' boots back on?
The Subprime Crisis: Is Government Housing Policy to Blame? [FRB Finance and Economics Discussion Series]