Thanks, interesting post.
I think something like that did happen. I think a sane reform of the CRA, based on what we have learned from this economic crisis, would be a good thing, but with the Dems in charge a so-called "reform" of anything would only make things worse. The question is, how much of a factor was the CRA?
My gut tells me that measures such as the CRA are fundamentally dangerous. For example, Carter's original CRA was not as harmful as Carter's 1993 CRA modifications and zealous enforcement. (ACORN should be cut off, but watch what Obama/Pelosi/Reid tries next.) I don't believe that is the only cause of this crisis though.
On the other hand, removing regulations can also be harmful. In 2004 the SEC loosened the leverage rules, allowing some firm to go from maximum debt-to-net-capital ratio of 12 to 1, to much higher ratios. Only 5 were allowed to do that. Who were they? Surprise, surprise. Do Goldman Sachs, Merrill Lynch, Lehman Brothers, Bear Stearns and Morgan Stanley sound familiar? And now Paulson and Geithner look like foxes guarding the henhouse.
This is an extremely complex phenomenon, but economic libertarians will argue if there were no regulations at all, the problem would solve itself, while socialists, etc. will argue that 100% of the problem is the free market. I think both are wrong to see it in such absolute terms.