A favorite topic of some on the right is that the subprime housing crisis was caused by Barney Frank and other liberals who strongarmed lenders into making bad loans. The club that was allegedly used with the Community Reinvestment Act which encourages regulated institutions to lend in underserved areas. This lending accomplishment would be reviewed at the time banks renew their charters.
Conservatives say this program caused banks to make high risk loans in order to meet federal requirements. This allegation is wrong for the following reasons:
1. The program had been in effect since the seventies, with no problems and a low default rate.
2. The buyers received extensive housing counseling and were required to have good credit.
3. The great majority of subprime foreclosures came from non regulated institutions such as mortgage companies who did not have to comply with the Community Revinvestment Act.
4. A study by the FDIC showed that affordable housing lending was not the cause of the housing crisis.
Comments