The most important part of the quote in the argument is ‘consistent with safe and sound operations’ The law does not require institutions to make high-risk loans that jeopardize their safety. To the contrary, the law makes it clear that an institution's CRA activities should be undertaken in a safe and sound manner. The CRA is thirty years old so is most unlikely to have caused a crisis now; moreover it was actually weakened by the Bush administration just as the worst lending wave began. More than 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and the CRA and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations. loans made under the CRA program were made in a more responsible way than other subprime loans.^[1] With the subprime loans “Law didn’t make them lend. The profit motive did.”^[2]

1. ^ Aaron Pressman, The community reinvestment act had nothing to do with subprime crisis, Businessweek, 29th September, http://www.businessweek.com/investing/insights/blog/archives/2008/09/community_reinv.html
2. ^ Robert Gordon, Did liberals cause the sub-prime crisis?, The American Prospect,7th April 2008, http://www.prospect.org/cs/articles?article=did_liberals_cause_the_subprime_crisis

The Bank of England and Federal Reserve were doing their jobs; keeping inflation within a certain band. When the economy is down, as after September 11th they put interest rates down so that the economy does not deflate. Although low interests did help cause the housing bubble that sparked the credit crisis they are not caused by ‘over regulation’. Interest rates need to be set by someone and the banks that set them are becoming increasingly independent rather than more regulated. Less regulation would not have affected the central bankers policies. Indeed Alan Greenspan did not act to deflate the housing bubble instead taking a laissez-faire approach to the economy. Regulation also did not force people looking for morgages to believe that interest rates would remain unchanged, consumers made themselves more vulnerable by moving to adjustable mortgages to take advantage of the low interest rates.

The ratings agencies failed in their role in the market as a kind of regulator. Meaning that more regulation (both of them and by them) is needed not less. The rating agencies are paid by the issuers of bonds and other asset-backed securities to rate the level of risk inherent in these investments, therefore they had an interest in rating securities highly rather than in making sure they were financially sound. The EU as well as national governments have made moves towards investigating the agencies.^[1]

1. ^ Ben Bland, Head of S&P stands down amid criticism of rating agencies , 31st Aug 2007, http://www.telegraph.co.uk/finance/markets/2814862/Head-of-SandP-steps-down-amid-criticism-of-rating-agencies.html