This is not very encouraging. If the Financial Crisis Inquiry Commission can't cross the CRA off its list of potential causes of the crisis after all this time and all the evidence that is clearly against this explanation, what does that say about the chances they'll get this right? (And if they aren't willing to say that the CRA wasn't the problem because of worries over a political backlash, i.e. that some on the right might get upset and complain, that is not a good sign either. There may be reasons to worry about how certain groups were taken advantage of in the name of increasing home ownership among the middle and lower classes, but this did not cause the crisis.):
What Caused the Financial Crisis? Still 22 Possibilities, by Stephen Gandel: The head of the Financial Crisis Inquiry Commission, Phil Angelides, stopped by the office this morning. ... Angelides' visit underscored just how hard his job is. Here's why:
First of all, as Angelides points out, he doesn't have a heck of a lot of resources. And he has got a good current example of that. The report that was released on what caused Lehman to fail cost $38 million to produce. Angelides's total budget: $8 million. He's got to figure out not just what caused Lehman to fail but the entire financial system.
The second is Angelides mandate. When Angelides got the job last July, he was tasked with leading an investigation into 22 areas that could have caused the financial crisis. He was instructed by law to publish a report on the findings by the end of 2010. Now after 8 months in (and just 9 and 1/2 months to go), and two sets of commission hearings, how many of those possible explanations for the financial crisis has he crossed off his list? None. Zippo.
Take the Community Reinvestment Act. The CRA, which encouraged banks to make loans to lower-income folks and minorities, has been a favorite whipping boy of some people who are looking to score political points with the financial crisis. So the CRA, unsurprisingly, makes it onto Angelides' list of areas he has to look into. So at the FCIC's second set of hearings, not one but three professors are asked about the CRA as a cause of the financial crisis. One presented a whole paper about it. All three say that CRA was not a factor. I asked Angelides today if he thinks the CRA is to blame. He said his panel is still looking into it.
In fact, not only is Angelides not crossing things off his list, he's adding to them. ... But the problem Angelides is that you can't pass regulations against 22 different causes of the financial crisis. ...
Angelides has 10 members of his panel and they come from both the right and the left. And that is a challenge. But he has got to get the group to see that if the FCIC concludes that 22 factors or more lead to the financial crisis, people are just going to throw their hands up and decided there is no way to stop financial crisis, and move on. That could lead to a long-term uncertainty in America that could hold down assets prices for houses and stock permanently. For the commission to have a real impact it has to start saying yes, more than one thing caused the financial crisis, but at least some things are so remote that they are worth crossing off the list.
Perhaps the final report will dismiss the CRA explanation, but when asked, why not rule it out now? The answer given above -- that they are still looking into it -- implies it remains an open question, and encourages those who are pushing this explanation because it accords with their ideological bias against government.
Here's a small taste of the vast amount of evidence against the CRA explanation: