The leftist "fair lending" CRA idiocy is the single biggest cause of the current problems.
Heh, I keep hearing that meme, but when I ask actual bankers about it, their comment is, paraphrased: "Bullshit."
I attended a talk by a rather prominent community banker (who also sat on the Fed Board), who basically said that nobody ever made an unsound loan because of the CRA, and that this is just a bunch of politicians making hay.
Read the CRA some time. Notice that there are ironclad defenses against its provisions, one of which is, paraphrased, "unacceptably risky loans."
Additionally, when I look at the data surrounding sub-prime loans and MBS's, I have to call "Bullshit."
You want to know the biggest contributor? MBS' themselves. MBS' immunize the originator against the riskiness of loans; if you're just going to turn around and sell the loan, it doesn't matter if the debtor can't pay. So, all that matters is (1) finding someone to take out a loan and (2) finding some sucker to take it off your hands.
This is made even easier when the bond ratings agencies work for you -- which they did. The MBS issuers paid the ratings agencies, and guess what? They got good ratings. And if they didn't get good ratings, they paid someone else.
Contrast this with the pre-MBS loan process, in which a bank actually held a mortgage to maturity. It really matters if the debtor can pay in that case.
Now toss in a bunch of banks who are levered up using these MBS pools as security for the leverage. The market goes south a bit, and they have to unwind the leverage. But wait, they can't -- now everyone knows that the MBS ratings are trash, and because nobody can value them, nobody is willing to buy them. Hooray, sell at a deep discount. Wait, your equity in the margin account just went down in value because of that discount? Margin call! Sell more MBS' at a discount. Wait, your equity in the margin account just went down because of that discount? Margin call! ... Repeat until bankruptcy or bailout.
Seriously, quit with the CRA drum-banging. You're wrong.