Well, let us help you, Brad

This argument from ignorance is always a bad idea;

I must confess that I have not yet read Fragile by Design by the always-thoughtful Steve Haber and the very sharp Charlie Calamiris [sic]...

One hopes the Treasury Dept Sec'y (Lloyd Bentsen) Professor DeLong once served, during the Clinton Administration, got advice based on things he actually had read.

The Community Reinvestment Act is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound operations…

Granted that that last part, “consistent with safe and sound operations”, has a tendency to become a dead letter under regulatory pressures, and that the depository institutions covered by the CRA come under pressure to make risky loans that they really should not. But that does not create risks of systemic distress or financial crisis. The depository institutions are insured by the FDIC, after all. You can complain that the CRA gets taxpayers onto the hook as insurers of loans that should not have been made. You cannot complain that the CRA forces overleveraged and undercapitalized systemically-important financial institutions to hold the lousy mortgages of low-income moochers–yet that, by all accounts, is what Haber and Calomiris’s argument is.

I don’t understand it. It just doesn’t seem to add up, arithmetically…

Well, when you get around to actually informing yourself what the argument is, maybe it will, Brad. You will see that Calomiris and Haber, in Fragile By Design, explain how;

If a bank makes only solid loans to solid borrowers, there is a little chance that its loan portfolio will all of a sudden become nonperforming. If a bank makes riskier loans to less solid borrowers but sets aside extra shareholder capital to cover the possibility that  those loans will not be repaid, its shareholders will suffer a loss, but the bank will not become insolvent. Any coherent account of the subprime crisis must put this  fundamental logic about banking crises at center stage and explain how it was that so many  lenders ended up making so many risky loans while maintaining very little capital to protect themselves against insolvency.

Of course, since;

In this chapter [The New U.S. Bank Bargain] we focus primarily on the first prerequisite for a banking crisis, examining the process by which bank loan portfolios became increasingly risky. How did it come to pass that in 1990 a mortgage applicant needed a 20 percent down payment, a good credit rating, and a stable, verifiable employment and income history in order to obtain a low-risk, 30-year fixed-rate mortgage, but by 2003 she could obtain a high-risk, negatively amortizing adjustable-rate mortgage by offering only a 3 percent down payment and simply stating her income and employment history, with no independent verification?

part of the answer is that the Clinton Administration in which J. Bradford DeLong proudly served, enabled it, we can understand why the Berkeley economic historian would be reluctant to read the chapter.

Though there are many other chapters that don't have anything to do with the subprime crisis, that he might find more interesting.