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 ... (full story)