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Press Release

Subprime May Not Have Caused the 2000s Housing Crisis, Finds Cleveland Fed Researcher

During the 2000s housing boom and bust, Cleveland witnessed both high growth in subprime debt and high foreclosure rates. Despite this pattern, it is not clear that these two facts are directly linked. In this Economic Commentary, Cleveland Fed researcher Lara Loewenstein explains how the housing boom and bust in Cleveland supports the narrative that subprime was largely a consequence of a broader national phenomenon as opposed to a primary cause of subsequent foreclosure crisis.

This Economic Commentary compares Cleveland’s Slavic Village neighborhood, which was a prime example of the subsequent foreclosure crisis because of its high amount of subprime borrowing and high number of foreclosures, with a higher-income Cleveland neighborhood, and finds that the percentage change in default rates during the bust was no larger in Slavic Village despite its higher subprime mortgage debt growth.

While subprime debt was a prominent source of debt in Cleveland and especially in its Slavic Village neighborhood during the 2000s, it is difficult to peg subprime debt as playing a causal role in the subsequent foreclosure crisis.

Read more: Subprime May Not Have Caused the 2000s Housing Crisis: Evidence from Cleveland, Ohio

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell,, 513.455.4479