Regulation did not cause the sub-prime crisis

I've recently read a lot of chatter on the blogosphere that implies that, somehow, regulation was the cause of the sub-prime crisis. Usually, the blame is shifted on the Community Reinvestment Act (CRA), which was originally enacted in 1977. The basic goal of the CRA was to require banks to stop the practice of redlining. (Basically the practice of refusing to offer credit to, or increasing the cost of credit to, individuals and businesses located in poor or minority neighborhoods.) The CRA did not require that credit be offered to un-credit-worthy individuals - just that credit be offered to credit-worthy individuals even if they lived in a poor or minority neighborhood.

The idea that the CRA caused the sub-prime crisis is completely false. Robert Gordon wrote an excellent article about this issue on April 7, 2008. It's called "Did Liberals Cause the Sub-Prime Crisis?"

Some key points from the article:

• About 50% of the sub-prime loans made were made by independent mortgage companies that are not required to follow CRA guidelines.
• Another 25-30% of the sub-prime loans made came from bank subsidiaries and affiliates, and they do not have to fully follow CRA guidelines.
• Institutions that do not have to comply with CRA made sub-prime loans at twice the rate of CRA-compliant institutions.

Conservatives need to recognize that deregulation is what got us into this mess. CRA has been around since 1977, and in fact, a study published in January of this year suggests that

• CRA deterred irresponsible lending,
  
• CRA institutions sold fewer of the sub-prime loans they did make onto the secondary market,
• Sub-prime loans made by CRA institutions were not as damaging (i.e., had lower interest rates) as sub-primes loans made by non-CRA institutions, and
• Foreclosure rates were lower in metropolitan areas with higher concentrations of CRA lenders.

Quite frankly, conservatives need to QUIT BLAMING THE POOR AND MINORITIES for the results of the greed of the wealthy. They need to take a little of the "culture of personal responsibility" for themselves.