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CONCLUSIONS OF THE FINANCIAL CRISIS INQUIRY COMMISSION xxvii

risky mortgages. Based on the evidence and interviews with dozens of individuals in-
volved in this subject area, we determined these goals only contributed marginally to
Fannie’s and Freddie’s participation in those mortgages.
Finally, as to the matter of whether government housing policies were a primary
cause of the crisis: for decades, government policy has encouraged homeownership
through a set of incentives, assistance programs, and mandates. These policies were
put in place and promoted by several administrations and Congresses—indeed, both
Presidents Bill Clinton and George W. Bush set aggressive goals to increase home-
ownership.
In conducting our inquiry, we took a careful look at HUD’s affordable housing
goals, as noted above, and the Community Reinvestment Act (CRA). The CRA was
enacted in  to combat “redlining” by banks—the practice of denying credit to in-
dividuals and businesses in certain neighborhoods without regard to their creditwor-
thiness. The CRA requires banks and savings and loans to lend, invest, and provide
services to the communities from which they take deposits, consistent with bank
safety and soundness.
The Commission concludes the CRA was not a significant factor in subprime lend-
ing or the crisis. Many subprime lenders were not subject to the CRA. Research indi-
cates only  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.
Nonetheless, we make the following observation about government housing poli-
cies—they failed in this respect: As a nation, we set aggressive homeownership goals
with the desire to extend credit to families previously denied access to the financial
markets. Yet the government failed to ensure that the philosophy of opportunity was
being matched by the practical realities on the ground. Witness again the failure of
the Federal Reserve and other regulators to rein in irresponsible lending. Homeown-
ership peaked in the spring of  and then began to decline. From that point on,
the talk of opportunity was tragically at odds with the reality of a financial disaster in
the making.
* * *

WHEN THIS COMMISSION began its work  months ago, some imagined that the
events of  and their consequences would be well behind us by the time we issued
this report. Yet more than two years after the federal government intervened in an
unprecedented manner in our financial markets, our country finds itself still grap-
pling with the aftereffects of the calamity. Our financial system is, in many respects,
still unchanged from what existed on the eve of the crisis. Indeed, in the wake of the
crisis, the U.S. financial sector is now more concentrated than ever in the hands of a
few large, systemically significant institutions.
While we have not been charged with making policy recommendations, the very
purpose of our report has been to take stock of what happened so we can plot a new
course. In our inquiry, we found dramatic breakdowns of corporate governance,