Was it the community Reinvestment act 1977?

Subprime lending was not only allowed to get out of control by the US government, it was encouraged. In 1977 the Community Reinvestment Act (CRA) was passed by the Carter Administration and the US congress.

The CRA was designed to make loans more accessible to low and moderate income neighbourhoods. This was implemented in a bid to stop Redlining and ensure that a certain percentage of banks’ lending portfolios were made in these neighbourhoods. If banks refused to open branches in these areas then any application for branch expansions in other more desirable areas were declined and they could also be hit with fines. This appears to be a fair and just way to reduce inequality so why are certain people blaming this for enabling the subprime crisis?

Those who blame the CRA, such as John Carney, point out that while it may have been enacted 25 years ago it was not a static piece of legislation. In 1995, regulators began to enforce the CRA in a very different way than they had in the past, and the federal government were given far more power to punish banks which did not comply with the CRA. 

However, blaming the CRA for the subprime crisis in not a substantial argument as there is evidence that loans made under the CRA program had a higher degree of supervision, carried lower rates, and were less likely to end up securitized into MBS’s according to a study by the law firm Traiger & Hinckley (PDF file here)

Serving the credit needs of low-medium income (LMI) borrowers is arguably the most important facet of a CRA performance examination. And looking at the small share of subprime lending that can be attributed to the CRA (especially to LMI borrowers) has led me to conclude that of all the factors contributing to the subprime crisis, this was the least significant.  The CRA did not make these other lenders, who did not fall under its jurisdiction lend, the profit motive did.