In short, those political hacks are scammers not to be trusted in the least. They put political ideology over reality, even if it means trying to call fraud legitimate…even after seeing all the damage that was done!

Why is the "blame the CRA" angle complete trash? A number of reasons…

CRA is old. Why did it suddenly cause a blow up?

CRA was not in the UK. Why did they have a real estate bubble at the same time?

CRA did not apply to hedge funds. Why did they blow up?

CRA did not apply to most subprime lenders. Why did they blow up?

CRA (if it was the core cause) would mean that the real estate bubbles would have imploded hardest in the poorest communities. Scientific data (aka: "the facts") show the exact opposite to be true…it was middle income and wealthier areas that were hit hardest.

Tons of great CRA research here
http://www.ritholtz.com/blog/2009/06/cra-thought-experiment/
http://www.ritholtz.com/blog/2008/12/fdic-chairman-sheila-bair-on-cra-not-guilty/
http://www.ritholtz.com/blog/2009/06/most-subprime-lenders-werent-covered-by-cra/
http://www.ritholtz.com/blog/2008/12/more-cra-idiocy/
http://www.ritholtz.com/blog/2010/07/cra-fannie-freddie-coup-de-grace/
http://www.slate.com/id/2201641
http://www.businessweek.com/investing/insights/blog/archives/2008/09/community_reinvestment_act_had_nothing_to_do_with_subprime_crisis.html

and finally, a free $100k to anyone who can win a public debate in blaming the CRA
http://www.ritholtz.com/blog/2009/06/100000-cra-challenge/

Thanks for your post, and for revealing those shocking numbers.

If I might play devil's advocate just for a moment, weren't the banks merely doing what the United States Government asked them to do? After all the Community Reinvestment Act:

Requires the appropriate federal financial supervisory agencies to encourage regulated financial institutions to meet the credit needs of the local communities in which they are chartered.

Alternatively, as you put it in your own post, perhaps:

The role of government is to protect the wealth of the opulent from the stupid majority.

Jim

The problem *was* the fraudulent predatory loans & the exotic scammy investment products that used them as a base.

The post on seobook you just commented on highlighted how senior Citibank folks knew over 80% of their mortgages were "defective" … in their own words.

2% or 3% and maybe it is a bad set of software & some consumers scamming the system, but something like 80% means they were intentionally fraudulent. Even as far back as 2004 the FBI warned on an epidemic of mortgage fraud.

Short sellers were a scape goat…but they didn't force those banks to make fraudulent loans.