During his February 11 radio program, Rush Limbaugh advanced the right-wing myth that the Community Reinvestment Act (CRA) "was used by ACORN and their allies to wreck the housing market by wrecking the mortgage market" and thus caused the financial crisis. Limbaugh later added: "Obama still supports the very thing that caused the sub-prime mortgage crisis in the first place. ACORN still supports it. [Rep.] Barney Frank and [Sen.] Chris Dodd, both of whom should be sharing a cell with Bernie Madoff, still support it"
From the February 11 broadcast of Premiere Radio Networks' The Rush Limbaugh Show:
LIMBAUGH: So what exactly, I need to ask, what exactly did the Republicans do to reduce regulations? Honestly. What specifically did they do that eliminated key regulation that would have prevented the housing collapse. Specifics please. They can sit around here and they can blame Bush and blame the Republicans all they want but I want to know what the Republicans did. Because the truth of the matter is, they did it.
The Community Reinvestment Act was hatched by Carter, it was expanded by Bill Clinton, it was used by ACORN and their allies to wreck the housing market by wrecking the mortgage market by demanding that mortgages be given to people who could no way pay them back. Ergo the sub-prime mortgage crisis. It was called affordable housing and it was designed to wreck the whole system. AIG and the rest, I mean the- I meant I'm not I don't defend AIG, but they were treating loans derivatives, if you will, that was based fundamentally on loans created by liberal policies.
Meanwhile, in case you don't know it, Obama still has not killed the Community Reinvestment Act. Obama still supports it. Obama still supports the very thing that caused the sub-prime mortgage crisis in the first place. ACORN still supports it. Barney Frank and Chris Dodd, both of whom should be sharing a cell with Bernie Madoff, still support it. So let me challenge. They're not going to come on this program and debate me. I know they're not going to do that on healthcare. Let me challenge them again. Obama and the Democrats, eliminate the Community Reinvestment Act and all laws that compel banks to make loans to poor people who can't afford them.
Fact: Experts say CRA did not contribute to financial crisis "in any substantive way"
Bernanke: Experience "runs counter to the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties." In a November 25, 2008, letter, Federal Reserve chairman Ben Bernanke stated: "Our own experience with CRA over more than 30 years and recent analysis of available data, including data on subprime loan performance, runs counter to the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties."
Most subprime mortgages not issued by institutions under CRA. In a paper published on the website of the Federal Reserve Bank of San Francisco, Michigan law professor Michael Barr stated that as of 2005: "Only 25 percent of subprime loans were made by banks and thrifts, and the Federal Reserve reports that only six percent of subprime loans were CRA-eligible." Similarly, a 2008 study by a law firm specializing in CRA compliance estimated that in the 15 most populous metropolitan areas, 84.3 percent of subprime loans in 2006 were made by financial institutions not governed by the CRA.
SF Reserve Bank's Yellen: "[S]tudies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households." Janet Yellen, president and CEO of the Federal Reserve Bank of San Francisco, in a March 2008 speech criticized efforts to blame CRA lending for weaknesses in the mortgage market, stating:
There has been a tendency to conflate the current problems in the subprime market with CRA-motivated lending, or with lending to low-income families in general. I believe it is very important to make a distinction between the two. Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans, and studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households. We should not view the current foreclosure trends as justification to abandon the goal of expanding access to credit among low-income households, since access to credit, and the subsequent ability to buy a home, remains one of the most important mechanisms we have to help low-income families build wealth over the long term.
Slate's Gross: "[t]he notion that the Community Reinvestment Act is somehow responsible for poor lending decisions is absurd." In an October 7, 2008, Slate article, Daniel Gross, a business columnist for Newsweek and author of Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation, criticized the notion that affordable housing initiatives caused the financial crisis, writing that "the notion that the Community Reinvestment Act is somehow responsible for poor lending decisions is absurd" and that "lending money to poor people and minorities isn't inherently risky. There's plenty of evidence that in fact it's not that risky at all." Gross further explained, "On the other hand, lending money recklessly to obscenely rich white guys ... can be really risky. In fact, it's even more risky, since they have a lot more borrowing capacity."
Fact: Since 2008, Limbaugh has repeatedly parroted debunked CRA claim
Following the aftermath of the financial crisis in 2008, Rush Limbaugh has frequently used his radio show -- and on one occasion The Jay Leno Show -- as a platform to make the false claim that the CRA and affordable housing led to the subprime mortgage crisis.