STILL BLAMING BLACK PEOPLE FOR THE CREDIT CRISIS.

Charles Krauthammer does his best to make respectable the conservative argument that the Community Reinvestment Act, which encourages federally insured banks and thrifts to lend money to poor and minority communities, is responsible for the credit crisis.

For decades, starting with Jimmy Carter's Community Reinvestment Act of 1977, there has been bipartisan agreement to use government power to expand homeownership to people who had been shut out for economic reasons or, sometimes, because of racial and ethnic discrimination. What could be a more worthy cause? But it led to tremendous pressure on Fannie Mae and Freddie Mac -- which in turn pressured banks and other lenders -- to extend mortgages to people who were borrowing over their heads. That's called subprime lending. It lies at the root of our current calamity.

This is the sort of Big Lie that people who are in a panic are inclined to believe, both because it is simple and it plays on long-standing prejudices. But, as Robert Gordon pointed out, only around 25 percent of subprime loans came from bank subsidiaries and affiliates covered under CRA.

Most important, the lenders subject to CRA have engaged in less, not more, of the most dangerous lending. Janet Yellen, president of the San Francisco Federal Reserve, offers the killer statistic: Independent mortgage companies, which are not covered by CRA, made high-priced loans at more than twice the rate of the banks and thrifts. With this in mind, Yellen specifically rejects the "tendency to conflate the current problems in the sub-prime market with CRA-motivated lending." CRA, Yellen says, "has increased the volume of responsible lending to low- and moderate-income households."

This idea that "political correctness" or a desire to help low-income people own homes fueled the market just flies in the face of everything we know about capitalism, which is that, in business, people do things to make money, not to be generous and wonderful people. That's why the system works. The finance industry figured out how to make money by cutting up risky mortgages as securities and selling them. But as I've said before, even if 100 percent of sub-prime loan defaults were made by minorities, without the instruments developed to make tremendous amounts of capital off of this debt, the crisis would not have endangered the entire economy. Even so, that's not the case. CRA did not play a key role in exacerbating this crisis; that was done by mortgage companies and bank subsidiaries not covered by that law. But once again, the attraction of Big Lies is that they are so terrifyingly familiar.

--A. Serwer