CRA is an acronym for the Congressional act that is the genesis of the current liquidity crisis gripping the nation’s huge mortgage firms, investment banks and AIG, everybody's financial insurer. Passed into law in 1977 during the troubled administration of Democrat Jimmy Carter, the Community Reinvestment Act was meant to stop banks from a process known as "redlining."

At the time, many banks had mapped out whole neighborhoods where they would not extend credit which is silly since credit should be extended to whoever has the ability to repay. In answer to this "redlining" Congress proposed even dumber legislation whereby banks were forced to lend within these redlined borders. Each tact stereotyped residents unfairly – one assumed no one was credit worthy in an area while the other assumed everyone was -– and as it turned out neither policy would be of any benefit to the long-term future of the areas in question.

Under terms of the CRA legislation, banks that failed to lend to their "whole community" could see expansion or merger efforts stifled. If any community activist group recognized by CRA – like the widely scandalized ACORN – stood up and filed protest, banks would be denied their opportunities for growth. While somewhat of a stick and carrot, CRA didn’t turn truly dangerous until after some changes by the Clinton administration (Democrats again) in 1995.

Under those revisions, the subprime collateralized debt obligation was made possible. Enforcement agencies told bankers that now "discriminating" in lending would occur if the lender used "arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants." Or in other words the very standards lenders go by such as income and credit history were now off limits according to government regulators. The stage was set and in 1997, the now defunct Bear-Stearns packaged the "first public securitization of CRA loans."

The sub-prime and Alt-A (liar) loan problems began to grow but stayed hidden to all but the most prying eyes, effectively camouflaged by the false increase in housing process.

The Clinton revisions were not forever and after 2002, a mandatory review was necessary and Congressional Democrats rebuffed proposed changes in 2003 by the Bush administration. Bush saw flames in the windows of Fannie Mae and Freddie Mac, two of the largest guarantors of subprime loans, and recommended both agencies be tightened up and folded under the control of the Treasury Department.

Rep. Barney Frank said at the time, "These two entities – Fannie Mae and Freddie Mac – are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." Frank’s total and perhaps deliberate misreading of Fannie and Freddie’s pending implosion prompted a headline in the Wall Street Journal last week depicting the current problem as, "Barney’s rubble."

Not everyone had been fitted with a pair of rose-colored glasses in the nation’s capital. In 2003 auditors found serious accounting irregularities at Fannie and Freddie. In addition to fraudulent accounting, the two government-backed agencies were being proven useless by the Congressional Budget Office. The purpose of the government sponsored enterprises was to reduce mortgage rates through their subsidized lending. But CBO discovered that their rates were basically no better than anybody else’s.

On the ropes, the agencies … taking a cue from coded language by Mr. Frank … made affordable housing their goal and "became the largest buyers of subprime and Alt-A mortgages between 2004 and 2007. What Fannie and Freddie wanted the mortgage industry could hold their nose and produce." The GSE’s books began to overflow with practically worthless paper. Congressional Democrats were pleased and Fannie and Freddie increased this pleasure by doling out millions in campaign contributions to their overseers.

In 2005 Fed Chairman Alan Greenspan made a stunningly accurate prediction. Testifying to Congress Greenspan said if the two agencies, "continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road. We are placing the total financial system of the future at a substantial risk," he concluded.

Oddly Congress reacted and the Senate banking committee entertained tough new standards to reign in Freddie and Fannie. The bill failed along party lines with Democrats lined up against it. John McCain was a co-sponsor of the bill. Barack Obama, who has received the second largest amount of campaign contributions from the agencies, chose to fiddle while Rome burned.

What is clear is none of this had to happen. Warning signs were abundant and solutions were delivered in a timely manner to Congress five and three years ago. Through it all, Democrats stood in the way of necessary reforms.

Make no mistake; this is not an example of the free market at work. This is one of the most heavily regulated industries on the planet being forced to follow a political agenda by their regulators that literally set the financial community on fire.

The proof is in the pudding. The unregulated hedge funds and private equity firms are still going about their business. They may have a few wounds but they are still viable and not asking for a handout from anybody. The regulated firms are in ruins.

This financial meltdown was a Congressional, Democrat-organized train wreck from start to finish.