Most Americans certainly did not think a bursting of the housing bubble was inevitable. I had many, many conversations with Americans on the housing market in the mid-00s, and the denial was staggering. Even most of those who thought it might be a bubble thought prices wouldn't collapse because they hadn't since the 1930s, and nobody could conceptualize another Great Depression.
The CRA causing the housing bubble is utterly ridiculous and nothing but blinkered ideological hackneyed pap. If you believe in the efficacy of markets, there is no way the CRA could have caused the crisis, which is ironic, because it is usually the dogmatic free market ideologues who most often make the argument. If you believe markets are the most efficient and best way to allocate resources in the economy, then by that logic, we should have seen the biggest affects in the CRA areas. We should have seen the biggest housing increases followed by the biggest declines, and subsequently the highest amount of defaults in the CRA areas. But that did not happen. In fact, the opposite happened.
No doubt the GSEs played some role in the housing crisis - being that they were 40% of the housing market, how could they not? They did lead to a decline in credit standards. The problem for the dogmatic, free market ideologues, though, is that GSE conforming loans did better than non-GSE non-conforming loans. Conforming loans had fewer defaults than non-conforming loans, and house prices funded by conforming loans did not rise nor fall as much as non-conforming loan. IOW, even if you accept "the GSEs are responsible" meme, the free market then took the lowering of credit standards to orders of magnitude higher as non-GSE lenders through all sense out the window and loosened credit much greater than the GSEs ever did.
The CRA causing the housing bubble is utterly ridiculous and nothing but blinkered ideological hackneyed pap. If you believe in the efficacy of markets, there is no way the CRA could have caused the crisis, which is ironic, because it is usually the dogmatic free market ideologues who most often make the argument. If you believe markets are the most efficient and best way to allocate resources in the economy, then by that logic, we should have seen the biggest affects in the CRA areas. We should have seen the biggest housing increases followed by the biggest declines, and subsequently the highest amount of defaults in the CRA areas. But that did not happen. In fact, the opposite happened.
No doubt the GSEs played some role in the housing crisis - being that they were 40% of the housing market, how could they not? They did lead to a decline in credit standards. The problem for the dogmatic, free market ideologues, though, is that GSE conforming loans did better than non-GSE non-conforming loans. Conforming loans had fewer defaults than non-conforming loans, and house prices funded by conforming loans did not rise nor fall as much as non-conforming loan. IOW, even if you accept "the GSEs are responsible" meme, the free market then took the lowering of credit standards to orders of magnitude higher as non-GSE lenders through all sense out the window and loosened credit much greater than the GSEs ever did.
