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What caused the housing bubble and collapse of the financial system? Many fingers have pointed to a lack of regulation, financial innovation that didn't live up to its bracelet cartier love occasion promises of risk sharing and risk reduction, and low interest rates from the Fed, which created an excess of liquidity.


Another cause that's often cited says the financial crisis was the result of government pressure to make subprime home loans to those at the lower end of the income scale. But recent work from the National Bureau of Economic Research provides no support for that claim.


The typical narrative is that government, through the Community Reinvestment Act (CRA) and Fannie Mae/Freddie Mac, caused lenders to reduce standards in order to make these loans. That in turn led to an abundance of loans to people who could not afford to repay them. These loans went into default in large numbers, and that fueled the financial crisis.


For instance, Rep. For years Congress has been pushing banks to make risky subprime loans. Fox News also supported this argument, "Look. You go all the way back to the Community Reinvestment Act, under Jimmy Carter, expanded under Bill and Hillary Clinton   they put the guns to the banks' heads, and said, "You have got to do these subprime loans.


However, the new evidence from Manuel Adelino of the Fuqua School cartier love bracelet fake of Business at Duke University, Antoinette Schoar of the MIT Sloan School of Management and Felipe Severino of the Tuck School of Business at Dartmouth undermines this story. In their paper, "Changes in Buyer Composition and theExpansion of Credit During the Boom," the researchers found:


"While there was a rapid expansion in overall mortgage origination during this time period, the fraction of new mortgage dollars going to each income group was stable. In other words, the poor did not represent a higher fraction of the mortgage loans originated over the period. In addition, borrowers in the middle and top of the distribution are the ones that contributed most significantly to the increase in mortgages in default after 2007. Taken together, the evidence in the paper suggests that there was no decoupling of mortgage growth from income growth where unsustainable credit was flowing disproportionally to poor people." Lots of previous evidence supports this conclusion. Many subprime lenders were not subject to the CRA. Research indicates only 6% of high cost loans   a proxy for subprime loans   had any connection to the law. Loans made by CRA regulated lenders in the neighborhoods in which they were required to lend were half as likely to default as similar loans made in the same neighborhoods by independent mortgage originators not subject to the law." Thus, in the battle over whether too much or too little regulation of the financial sector played a role in causing and exacerbating the crisis, the evidence points away mens cartier love bracelet from those who claim overzealous government regulation was at fault.

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