The Subprime Mortgage "Crisis" Will Fix Itself
Hardly a day goes by without someone's proposing how to make the bad situation in subprime mortgage lending even worse, writes Steve Berger. Legislators at all levels of government are contending for ownership of the most destructive idea. Finalists in this legislative race to the bottom include punitively stiff lending standards, foreclosure holidays and taxpayer-financed bailouts. He proposes a far simpler, fairer and effective course of action: let free people sort it out for themselves. FULL ARTICLE
Comments (8)
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Published: May 30, 2007 10:16 AM
How about shutting down the Federal Reserve and waiving all debt owed to it. It's massive credit creation powers were fraudulent to begin with. I don't see why all debt owed to it shouldn't be pardoned.
Published: May 30, 2007 10:34 AM
Dr Paul is indeed a foe of credit-money bubbles (although he has been rather quiet about such things in the present campaign - at least compared to previous campaigns).
As for getting rid of the Federal Reserve Board - good idea, but a seperate issue.
The people who have borrowed money in order to buy houses do not owe this money to the Federal Reserve Board (even though its credit expansion may have provided the money in the first place).
The article is correct.
NOTHING good can be done.
Doing nothing in hard times is very hard for politicians - but intervention (as the article points out) just makes things worse.
For example, in the government responded to the 1921 crash (the bursting of the credit-money bubble of the time) by doing nothing (apart from cutting government spending) and the economy was into recovery within six months. It was hard for people who lost their jobs and homes - but intervention would just have made things worse.
In 1929 (contrary to the myths spread by the media and the "education system") the government was hyper active in terms of interventions trying to counter the crash after the bursting of the credit money bubble of the late 1920's (for example there were various frantic efforts to prevent wages being cut - on the ground that this would undermine "demand"). And the result was to turn a crash into the Great Depression.
Wages, conditions of work and prices (all prices - including prices for services like insurance)must be allowed to adjust to changing conditions. Interventions (for example to force the providing of medical insurance, or electricity, or anything else at such and such a price) just make things worse than they otherwise would be.
Published: May 30, 2007 11:19 AM
The subprime bubble is the direct result of Greenspan's intervention in free markets, by manipulating interest rates to an unnecessary extreme.
More intervention will of course be the result, which will of course make things even worse. This is how depressions happen.
Published: May 30, 2007 12:39 PM
I'm not sure that I believe all that much in the "free market" since the securitization and profiteering that have caused the housing problems are just as much an artifact of the "free market" as the poor fiscal policy from on high.
It's better than short term intervention by the Fed, true, but it's still not a stable system. Maybe if the free market were truly free and totally transparent, it would be stable, but as it is, it's really not all that much better than the government.
Published: May 31, 2007 12:47 PM
Predatory loans is a big problem but there also needs to be some responsibility by the consumer shopping for the loan.
If you feel you are mature enough to undergo the process of owning a house the least you can do is educate yourself about the process. There are tons of resources available online and you can run comparisons of various banks and offers to see if what is quoted is reasonable.
Published: June 1, 2007 2:08 PM
There won't be any government bailout because it's nearly impossible to objectively determine who the actual victims, if any, are. How many homeowners are suffering from self-inflicted wounds? How many are investors who got caught flipping one property too many?
Laura Rowley put it well: "[A]s far as I can tell, none of these modern-day bandits held a gun to anyone's head and forced them to take out a loan."
Published: June 6, 2007 8:46 AM
looks like it is not fixing itself.
Published: August 10, 2007 9:38 AM