Did “minority lending” drive the crisis?

This is one of the queries I receive, in varying forms, every day.  Did policies such as the Community Reinvestment Act significantly worsen the housing bubble and the subsequent collapse?  Basically not, although in my view these were bad policies for other reasons.  They contributed to our current problems by only a small amount and of course these policies have been around for a long time before the housing bubble ever got started.  Here is one back-of-the-envelope debunking of the "diversity recession" idea.  Matt Yglesias links to some other debunkings.

You can, however, cite the general obsession with extending home ownership as strong evidence that putting Democrats in charge does not suffice to solve our regulatory problems.

Only polite comments will be left standing…


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