The problem occurred when the federal government — spurred by both parties, but starting with Bill Clinton’s administration — attempted to artificially increase demand in home ownership by subsidizing increasingly risky mortgages. That actually started with interventionist regulation: a revision to the Community Reinvestment Act in 1999. That put pressure on banks to expand lending and lower standards for approvals; later, Congress would step up subsidizing such loans through Fannie Mae and Freddie Mac, which then sold the mortgages on the bond markets with the implicit guarantee from the federal government. That created a huge but artificial increase in demand that drove housing values way up, delinking them from their traditional relationship to the rate of inflation. Suddenly lots of people saw their equity as an ATM, so consumer spending rapidly increased, and politicians of both parties took credit for great economies and rising home ownership.
This analysis has been debunked numerous times. The latest is from Barry over at the Big Picture. Barry offers detailed and nuanced analysis, which means it's already far above Ed "I ran a call center so I'm qualified to write about economics" Morrissey's head. If you're really interested, you can search Barry's site for "CRA;" he's taken this meme down several times.
Ed's an economic idiot; he keeps trying to write something of substance, only to prove on a regular basis that those who ran call centers aren't qualified to write about economics.
Here's the key point for me:
The housing bubble was global. So either the CRA somehow caused all these other countries to engage in risky lending, or something else was going on.