Ezra Klein has this piece on “Clinton and the housing boom“::
“This got me wondering what exactly happened around 1995 to cause that jump,” Dylan wrote to me. “Correlation isn’t causation, but I dug up this document, the National Homeownership Strategy, which HUD Secretary Henry Cisneros and Bill Clinton announced in 1995. The strategy involved lowering standards for homeownership: reducing years of income first-time buyers needed to demonstrate, letting them tap retirement savings, letting mortgage sellers to use their own appraisers, etc. Here are a couple of articles interrogating its role in the subprime crisis. So here’s the graph again, with the National Homeownership Strategy added.”
The best summary was given by Russell Roberts of GMU in an October 2008 WSJ op-ed aptly entitled: “How Government Stoked the Mania”.
The relevant point:
The Community Reinvestment Act (CRA) did the same thing with traditional banks. It encouraged banks to serve two masters — their bottom line and the so-called common good. First passed in 1977, the CRA was “strengthened” in 1995, causing an increase of 80% in the number of bank loans going to low- and moderate-income families.
It was certainly not due to Greenspan´s notoriously famous “rates too low for too long” seven years later! Not to leave any doubts, my view is that monetary policy in 2001-03 was ‘too tight‘.