Tuesday, March 9, 2010

Why weren’t there Housing Bubbles Everywhere?

Thomas Sowell, as ever, brings simple logic to common nonsense….

During bad times, the blame game is the biggest game in Washington. Wall Street "greed" or "predatory" lenders seem to be favorite targets to blame for our current economic woes.

When government policy is mentioned at all in handing out blame, it is usually blamed for not imposing enough regulation on the private sector. But there is still the question whether any of these explanations can stand up under scrutiny.

Take Wall Street "greed." Is there any evidence that people in Wall Street were any less interested in making money during all the decades and generations when investments in housing were among the safest investments around? If their greed did not bring on an economic disaster before, why would it bring it on now?

As for lenders, how could they have expected to satisfy their greed by lending to people who were not likely to repay them?

From unionleader.com via NZBR

1 comment:

  1. Excellent point. Greed and Predatory Lending are two words most commonly used by the socialist left side designed to appeal to the masses and win votes. It would better to debate the question of what could Washington DC regulators and Wall Street done differently as one side was winning votes by promoting easy credit for everyone while the other side provided the creative juice for easy money.

    Even your statement, "As for lenders, how could they have expected to satisfy their greed by lending to people who were not likely to repay them?" assumes lenders made or lost money based upon repayment...which is not how it works in USA. Loan officer type jobs were turned into salesman jobs. People and Companies were paid jumbo upfront commissions for SELLING loans....no one every made a bonus based upon repayment...nor did they advance by making a very few high quality loans. The same is true on Wall Street you made money on SELLING CDO...you lost nothing if they were not repaid...investors were the losers not the sellers.

    ReplyDelete