Sunday, September 21, 2008

A Dark Fortnight for Moneychangers

To save the financial system, the government took it over.

Ironically, the financial crisis was caused by the government. Banks were forced (by liberal banking regulations) to sell mortgages to people who could not pay their bills. Oddly enough, many of those loans resulted in foreclosure.

The argument for forcing the banks to provide the loans is simple: get more people in houses, since homeowners are more stable economically. And it's politically popular to encourage home ownership, a symbol of success in America.

The first trouble with that is the usual liberal sloppy logic: just because owners of homes are more responsible and successful economically doesn't mean that making someone a homeowner will make them more responsible or successful. The part that makes a person responsible is having skin in the game: if you work hard to get something, you're more likely to work hard to keep it. Working hard means, among other things, living within your means. People who save for a down payment have shown they have what it takes to continue that lifestyle.

The second, and equally big trouble with forcing banks to make unsafe loans is that it artificially increases housing values, both for houses and for apartments. It's simple economics: more buyers means higher prices. In seeking to make loans easily available to marginal buyers, Congressional liberals ensured that everyone would be paying more for housing.

Loan availability should be based on the ability to repay, not simply on possession of a heartbeat.

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