My post did not isolate CRA, but spotlighted it as representing the conceptual viewpoint of our left of center colleagues. Whether one believes that giving is being a "good person," or that one can further ones career by making life easier for others, liberal-Democrat policy caused the meltdown.
This is in direct counterpoint to your claim that Republicans are more to blame since they were most recently in power. The problem goes back further than '79.
Conservative principles would have led to a more stable financial situation: no Freddie, no Fannie, no CRA.
Liberals are impulsive, and imprudent. They believe in quick changes, and risk new abuses worse than the evils that they would sweep away, since remedies are usually not simple, as in giving loans to people who, while they might be good individuals, do not deserve loans they cannot afford. Plato said that prudence is the mark of the statesman. There should be a balance between permanence and change, while liberals see progress in this case, as the taking more financial risk.
Conservatives believe in the principle of variety, while liberal perspectives result in a narrowing uniformity. Under conservative principles, there will be differences in class, material condition and other inequalities. Not everyone will have the same accommodations, or healthcare for that matter. The only uniformity will be before the law. Society will not be perfect. Consider the results of the constellation of Democrat innitiatives that have been outlined in these posts.
So this is not simply about the CRA, but about the entire package.
Be well.
The primary cause of the bubble was the Federal Reserve, IMO.
The reason why the Republicans are more culpable, however, is because they are the general philosophical champions of deregulation - even though Clinton and Rubin played their part. This crisis is a failure of deregulation.
If you have an understanding of financial history, this crisis is not a surprise, because financial history is littered with examples such as this. Financial bubbles are always precluded by a build-up of debt, and they are always marked by extreme overvaluation. You can read about financial crises here.
The Federal Reserve created and encouraged the build-up of debt but so did deregulation. Deregulation allowed the banks to build their debt to equity leverage from 12-15:1 to 30-40:1. The lack of deregulation in the Shadow Banking System - an unregulated part of the financial market - lead to the build-up of debt. Derivatives - which the International Swaps and Derivatives Association fought hard to exempt swaps from deregulation that Phil and Wendy Gramm famously shepherded through Congress - grew exponentially and lead to the massive increase in leverage.
This financial crisis was also a failure of philosophy that is generally espoused by Republicans - that markets are highly efficient. Highly efficient markets do not grossly misprice assets. If the price of a house doubles in a few years, then efficient markets are correctly pricing the price of your house. It is not overvalued, so the theory goes, because the market is always rational. If you believe this, then you can build mountains upon mountains of derivative structures based on the simple notion that housing prices do not appreciably fall across the country, let alone the world.
But that has been shown to be an utter fraud.
Deregulation is not always bad. I have usually thought it to be a good thing. And it has been very positive in some respects in the financial industry.
But it is not always a good thing. This crisis would not have occurred had the financial system not been as levered up as much as it had, full-stop. And deregulation allowed the massive leverage to occur.
There are many factors to blame for this mess. The most important was the Fed IMO. And the Democrats certainly are not blameless for several reasons, not least because they were the protector of the GSEs and allowed them to build up too much debt. However, since the Republicans are generally the champions of deregulation, and since most of the build-up in debt occurred either outside of the regulated financial system or because financial firms were allowed to do so, they are the more culpable party of the two.