The collapse of the housing market and financial industry has resulted in the normal amount of finger-pointing and searches for scapegoats, the latest of which have been the Community Reinvestment Act (CRA) and the Association of Community Organizations for Reform Now (ACORN). But the roles that have been played by these two acronyms have been far less damaging to the real estate market than that played by the major corporations and government institutions that manipulated markets and inflated the bubble in the first place.

Hundreds of local, regional, and national subprime mortgage lenders borrowed money from Wall Street investment firms to make loans to people buying or refinancing a house. When there were no borrowers left with good credit and stable income histories, these lenders gave mortgages to people with extremely poor credit, no credit, no income, and no assets. It was the easiest way to keep generating origination fees and the subprime industry did not have a stake in the eventual success or failure of the loans, as they were sold to Wall Street upon origination.

Wall Street investment firms like Bear Stearns, Lehman Brothers, and Merrill Lynch acted as middlemen in the process by providing subprime lenders with easy access to cash to make loans, then buying these loans from the lenders in order to securitize them for future sale as bonds. Investment companies charged investors to make these mortgage-backed securities, which investors thought were high-quality investments. Wall Street did not have a large stake in the eventual failure or success of the loans, except that the more loans they could securitize, the more they could sell to investors.

Bond insurers played a part by providing insurance on mortgage-backed securities, based on Wall Street firms' assurances that the mortgages were high quality when packaged together. A few might default, but not a large part of the entire group of loans. And anyway, with rising home values, the houses where families were unable to stop foreclosure by refinancing could be sold on the open market for more than the mortgage had been worth. So insurance companies charged a little bit to guarantee the securities, thereby making them look even safer. Insurers had a stake in the performance of the loans, but were convinced into believing that the bonds were of high enough quality to provide insurance on.

Rating agencies played their part by giving these bonds very high ratings, making them look to be very low risk, even though the bonds were promising to pay high interest rates. Typically, low risk means low return, but in the case of the subprime securities, low risk supposedly meant high returns. But the favorable ratings meant investors were willing to keep buying the securities. These agencies also had no stake in the success or failure of the loans, as they just provided their stamp of approval on them without ever having to own or invest in subprime mortgage securities.

The Federal Reserve lowered interest rates dramatically during the early 2000s, thereby making it much easier for banks to borrow and lend money. The greatest real estate bubble in history then formed, as anyone could get a loan at a low interest rate and no one had a stake in the eventual success or failure of the mortgages. They could just be securitized and sold to investors around the world or dumped on Fannie Mae and Freddie Mac and the toxic risk would be spread around the world. If the system collapsed, all of the players knew that the Fed and the government would step in to provide bailouts to prevent the recognition of the failure of the industry.

There is no doubt that ACORN, the Community Reinvestment Act, and other factors played a role in inflating the bubble and keeping housing prices rising far beyond sustainable levels, just as corrupt real estate brokers, mortgage brokers, and appraisers helped to overvalue properties in local areas. But all of these played merely supporting roles to the subprime lenders, Wall Street firms, bond insurers, ratings agencies, and the central bank that helped create and sustain the illusion that the housing market was in a phase of perpetual growth.