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The Subprime Crisis: Is Government Housing Policy to Blame?

Author

Listed:
  • Robert B. Avery

    (Board of Governors of the Federal Reserve System)

  • Kenneth P. Brevoort

    (Board of Governors of the Federal Reserve System)

Abstract

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. © 2015 The President and Fellows of Harvard College and the Massachusetts Institute of Technology

Suggested Citation

  • Robert B. Avery & Kenneth P. Brevoort, 2015. "The Subprime Crisis: Is Government Housing Policy to Blame?," The Review of Economics and Statistics, MIT Press, vol. 97(2), pages 352-363, May.
    • Handle: RePEc:tpr:restat:v:97:y:2015:i:2:p:352-363
    as

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    References listed on IDEAS

    as
    1. Peter J. Wallison, 2011. "Dissent from the Majority Report of the Financial Crisis Inquiry Commission," Books, American Enterprise Institute, number 50848, September.
    2. William C. Apgar & Ren S. Essene, 2009. "The 30th anniversary of the Community Reinvestment Act: restructuring the CRA to address the mortgage finance revolution," Monograph, Federal Reserve Bank of San Francisco, number 2009t3aotcrrtctatmf, January -.
    3. Robert B. Avery & Marsha J. Courchane & Peter Zorn, 2009. "The CRA within a changing financial landscape," Monograph, Federal Reserve Bank of San Francisco, number 2009tcwacf, January -.
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    5. Alan Greenspan, 2010. "La crisis," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 12(22), pages 15-60, January-J.
    6. Robert Avery & Raphael Bostic & Glenn Canner, 2005. "Assessing the necessity and efficiency of the community reinvestment act," Housing Policy Debate, Taylor & Francis Journals, vol. 16(1), pages 143-172.
    7. Robert B. Avery & Kenneth P. Brevoort & Glenn B. Canner, 2007. "Opportunities and Issues in Using HMDA Data," Journal of Real Estate Research, American Real Estate Society, vol. 29(4), pages 351-380.
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    9. Peter J. Wallison, 2011. "A dissent from the majority report of the financial crisis inquiry commission," Proceedings 1118, Federal Reserve Bank of Chicago.
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    More about this item

    Keywords

    housing policy; Community Reinvestment Act; CRA; affordable housing; GSE; subprime; regression discontinuity;
    All these keywords.

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • I00 - Health, Education, and Welfare - - General - - - General
    • P00 - Political Economy and Comparative Economic Systems - - General - - - General
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General

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