Help with a basic question

The hard conservative line on the crisis seems to be that low interest rates and loose mortgage requirements arising from political correctness or something led to the current mess. Andy McCarthy at the Corner presupposes something like this in a post mocking Obama. Sullivan last week quoted a Lisa Schiffren post that places blame for the crisis at community organizers who accused lenders of racism. I don’t doubt that political pressures distorted housing and mortgage markets. Indeed, our entire housing industry – the entire American Dream, you might say – is based upon distortions arising from political pressures. It seems like what’s being explained in this is a further set of distortions that might have contributed to but not, on its own, created the housing bubble but not the ensuing financial and credit crises. My question to conservatives explaining the current meltdown with reference to anti-racism and Fannie and Freddie and the like is: Are these things that Wall Street didn’t know about? Were the people who packaged and bought and sold mortgage backed securities ignorant of the on-the-ground conditions in actual housing markets? Didn’t they know about community organizers and low interest rates and Fannie and Freddie’s political mandates? Did they really dispose of hundreds of billions of dollars worth of investment instruments while ignorant of the basic political and regulatory conditions surrounding the underlying assets? If not, then mightn’t risk-awareness in financial institutions be a better explanation? If so, isn’t that an even better explanation?