Read this article (which I agree with), and you will get a good feeling for why I believe the government is to blame for this mess:
Seriously. Read it and be enlightened.
Filed under Austrian Economics, fiscal policy, Libertarian, politics, role of government
The article to which you linked lays the blame of the current financial problems at the feet of the Community Reinvestment Act. I think this article, responding to similar statements in the editorial pages of the Wall Street Journal, is a better reply than I could write myself. I’ll include just a few highlights here. (Sorry I don’t know how to do blockquotes.)
“Let me get this straight. Investment banks and insurance companies run by centimillionaires blow up, and it’s the fault of Jimmy Carter, Bill Clinton, and poor minorities?”
“The Community Reinvestment Act applies to depository banks. But many of the institutions that spurred the massive growth of the subprime market weren’t regulated banks. They were outfits such as Argent and American Home Mortgage, which were generally not regulated by the Federal Reserve or other entities that monitored compliance with CRA. These institutions worked hand in glove with Bear Stearns and Lehman Brothers, entities to which the CRA likewise didn’t apply.”
“… Lending money to poor people and minorities isn’t inherently risky. There’s plenty of evidence that in fact it’s not that risky at all. That’s what we’ve learned from several decades of microlending programs, at home and abroad, with their very high repayment rates. And as the New York Times recently reported, Nehemiah Homes, a long-running initiative to build homes and sell them to the working poor in subprime areas of New York’s outer boroughs, has a repayment rate that lenders in Greenwich, Conn., would envy. In 27 years, there have been fewer than 10 defaults on the project’s 3,900 homes. That’s a rate of 0.25 percent.”
“On the other hand, lending money recklessly to obscenely rich white guys, such as Richard Fuld of Lehman Bros. or Jimmy Cayne of Bear Stearns, can be really risky.”
The assumptions behind the article you site apparently are that the CRA is the dominant force. It is one of many currents in the flood of statism that threatens to engulf us today.
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