The CRA was passed by the 95th United States Congress and signed into law by President Jimmy Carter in 1977 as a result of national pressure for affordable housing. In Congressional debate on the Act, critics charged that the law would “distort credit markets, create unnecessary regulatory burden, lead to unsound lending, and cause the governmental agencies charged with implementing the law to allocate credit.” In response Congress included little prescriptive detail and gave agencies considerable regulatory flexibility.
I watched someone on Question Time say that politicians need their heads banging together until they sort this out. Perhaps if the question is whether we need more or less regulation, we had better first figure out whether the start of the problem was regulators distorting the markets and promoting unsound lending.
Ask yourself this: would or would not a wise business forced to make unsound loans find some way of packaging up the risk and selling it to someone else?
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