The Community Reinvestment Act was passed in 1977. It is a bit much in my opinion to blame a crisis in 2008 on that legislation.

I doubt that Sowell even believes that. Unfortunately a great many conservatives have an ideological blind spot when it comes to deregulation or the free market. Progressives and liberals have similar blind spots of course. Desperation to not be blamed for something which is a result of their ideology makes people say funny things.

However the facts are that most subprime loans were made by banks or brokers that were not subject to the CRA. Most loans made under the CRA were not subprime and were not securitized or sold.

In addition over the past eight years the Bush Administration has been weakening, not strengthening the CRA.

Fannie Mae and Freddie Mac do not originate loans. The private marketplace does that. The private marketplace then chopped these risky loans up, labeled them as AAA grade investments and sold them off. The repeal of Glass-Steagall under Clinton and the removal of bank capitalization and deposit requirements under Bush added more risk to the marketplace. Both of these things were demanded by conservatives.

In short the bankers and financial institutions demanded and received increasing autonomy from regulation, along with low interest rates from the Fed. Now that the entire world is on the brink of a financial meltdown and credit freeze some of the same cheerleaders for deregulation STILL can't admit that they were wrong.

Incredible.
Sowell is something else.

Below are some links which explain much of what really happened. The column by the conservative economist Ben Stein is particularly good. The rage just jumps off the page.

http://www.theledger.com/article/2008092...an__x2019_t_Win

http://online.wsj.com/article/SB122282690823092989.html?mod=rss_The_Tilting_Yard

http://www.businessweek.com/investing/insights/blog/archives/2008/09/community_reinv.html

http://www.alternet.org/workplace/101127...s_/?page=entire