It’s an article of faith among conservatives that the fundamental cause of the crisis was excess lending to poor people and minorities. It’s equally an article of faith among liberals that the lending had little if anything to do with the crisis. The conservative view faces 2 powerful counter-arguments: (1) after the year 2000, the real driver of subprime lending was the non-bank sector, not subject to the CRA; and (2) the subprime market was just too small to tank the US financial sector. Sub-prime lending only became a threat when sub-prime loans were packaged into derivatives. The CRA did not require anyone to do that. But the liberal view also faces a counter-argument: Sub-prime loans were the stuff of which the toxic derivatives were made, and it was not some idle whim or fancy of the bankers that led to the proliferation of sub-prime loans. For example, it was the pressure of the CRA that led to the invention of the concept of the “credit score” so as to diminish the discretion of lending institutions. Credit scores in turn became a driver of the expansion of credit to ever less creditworthy borrowers.
— David From on the Financial Crisis Inquiry Commission report. Frum reads the crisis as argumentum in utramque partem. Awesome.
