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.