Who would’ve thought? We should’ve

U.S. Rep. Jesse Jackson Jr.
U.S. Rep. Jesse Jackson Jr.

U.S. Rep. Jesse Jackson Jr. (D-Chicago) sounded amazed on the Don Wade and Roma show on WLS-AM 890 this morning.

Who would’ve thought, he said, that the financial and economic disaster we’re enduring could have been brought on just by trying to offer low-income people the opportunity to have an affordable mortgage so they could participate in the American dream of owning a home?

My question is: Why didn’t more people see it coming? Easy credit is not the only cause of the current problems, but the government’s requirement of banks to make risky loans to people who, in any other situation, wouldn’t qualify because of bad credit or low income is one of the factors that has led to where we’re at today.

The availability of subprime mortgages, which also put the “American dream” into reach of many whose income and credit history wouldn’t otherwise have been able to get loans.

Here’s what economist and columnist Thomas Sowell wrote back in August:

The Community Reinvestment Act lets politicians pressure lenders to lend to people they might not lend to otherwise — and the same politicians are quick to cry “exploitation” when the interest charged to high-risk borrowers reflects that risk. The huge losses of sub-prime lenders, some of whom have gone bankrupt, demonstrate again the consequences of letting politicians try to micro-manage the economy. Yet with all the finger-pointing in the media and in government, seldom is a finger pointed at the politicians at local, state and national levels who have played a key role in setting up the conditions that led to financial disasters for individual home buyers and for those who lent to them.

The U.S. government has had to get involved in “rescuing” the market (instead of, apparently, letting it work itself out over time, because we’re too impatient for that) because of unnecessary government intervention in the loan process. This is a prime example of why the government needs to leave as small a footprint as possible in business and society. This is plainly the result of social engineering: government meddling in the markets to guarantee a social outcome.

Nothing good ever comes of social engineering, Rep. Jackson. Government should protect rights, for sure, but guaranteeing home loans at the expense of taxpayers? That’s forced equity, and won’t stand in a free market.

As should be obvious by now.

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2 thoughts on “Who would’ve thought? We should’ve

  1. The Community Reinvestment Act was the excuse, not the reason, for this financial disaster. No one was holding a gun to the heads of the people making the bad loans. The loans were made because the market value was rising, so time would cover any mistakes made in the loans and if you still had some dogs, you could bundle them along with some good loans and sell them to the Chinese. That’s how you make your bonus each quarter, baby!
    Then the real estate bubble burst and the market value of all these properties started going down. Oops!!!

  2. You have written an accurate article. I especially enjoyed your analysis regarding the lack of patience to let things work out along a natural timeline. It will probably get worse rather than better. Another house of cards to avoid the pain of real life. We reap what we sow and after this next election — the harvest will be frightening.

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