Of course low rates contributed to the financial crisis. That’s not the question. The question is whether the Fed had any choice in the matter given the policy of Congress to pump trillions of dollars into the housing industry. If the Fed had kept rates high, it would have caused an immediate economic crisis, and Congress would have had a fit. It’s not the Fed’s role to decide how much money should be invested in housing. It’s also not the role of Congress to do that. However, having usurped the function of the market in that regard, Congress made the decision, and the Fed was bound to simply adjust to it. What the Fed did was try to keep the rates at a level where the rest of the economy was still growing, even though the Congressional housing policy was sucking it dry.
Can you please explain more about what this crisis would have been?