Mythbusting the right's subprime excuses

Rick Perlstein
April 11th, 2008 - 7:32am ET

It's one of the most brazen and absurd pieces of right-wing propaganda out there: the claim that liberals caused the subprime housing crisis by pressuring Congress to force banks to loan to uncreditworthy borrowers. At the American Progress web site, Robert Gordon explains where the "idea" came from:

The idea started on the outer precincts of the right. Thomas DiLorenzo, an economist who calls Ron Paul "the Jefferson of our time," wrote in September that the housing crisis is "the direct result of thirty years of government policy that has forced banks to make bad loans to un-creditworthy borrowers." The policy DiLorenzo decries is the 1977 Community Reinvestment Act, which requires banks to lend throughout the communities they serve.

The Blame-CRA theme bounced around the right-wing Freerepublic.com. In January it figured in a Washington Times column. In February, a Cato Institute affiliate named Stan Liebowitz picked up the critique in a New York Post op-ed headlined "The Real Scandal: How the Feds Invented the Mortgage Mess." On The National Review's blog, The Corner, John Derbyshire channeled Liebowitz: "The folk losing their homes? are victims not of 'predatory lenders,' but of government-sponsored -- in fact government-mandated -- political correctness."