Fed: CRA Didn't Encourage Subprime Loans

The Community Reinvestment Act isn’t the culprit behind the current housing meltdown, said Federal Reserve Governor Randall Kroszner in a speech to a Washington DC public policy forum.

Kroszner said that contrary to charges that that encouraging banks to lend to lower-income borrowers pushed banking firms into high-risk lending, most of the subprime loans took place in middle and higher-income neighborhoods.

The loans that are the focus of the CRA represent "a very small portion of the subprime lending market," Kroszner said.

Source: Dow Jones Newswires (21/03/2008)