Subprime Mortgage Crisis, Explained

I encourage everyone to read this article, explaining how government manipulation and regulation has created the current crisis.  The author explains how direct regulation, banks’ indirect fears that future approvals could be denied, and of course, massive amounts of paper fiat money pumped into the economy led to the mortgage industry meltdown.

Of course, being an elephant, the author has a blind spot:

“…not only were realtors required to sell to qualified buyers regardless of race, which they should have been, but banks were accused of a new kind of “financial redlining” if they didn’t provide the funds.”

So, in his view, the proper role of government is to force private companies to act as desired by regulators, and to suspend their own judgement in the matter.  The only problem is that today, government has taken this too far.

Well, how else is the government to determine whether banks are providing their social duty to lend to politically favored classes, other than quotas?

Hint to all elephants reading this.  If you find yourself agreeing with a liberal on the main idea (the principle) and then stammering “but this time they’ve taken it too far”, you need to stop, take a deep breath, and ask yourself if the principle is actually correct.

In this case, the principle is that government should dictate to banks how to lend.  Is this correct?  If not, then banks decide for themselves because it’s their money (or their investors’)!  In which case, they can specialize in whatever market they wish, and Martin Luther King be damned!

Donkeys who wish to lend their money to politically favored groups may do so.  I hope they make money this way, but I wouldn’t bet my own money on it!

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