Tuesday, October 30, 2007

Creating a need then filling it.

Thomas Sowell with another insightful piece titled "Political 'Solutions' "

Excerpt

In the San Francisco Bay Area, where housing prices are the highest in the nation, risky interest-only loans went from being 11 percent of all new mortgages in 2002 to being 66 percent of all new mortgages in 2005.

Study after study has shown that housing prices are highest where government restrictions on building are the most severe. That is the ugly result of pretty words like "open space."

Why were lenders lending to people whose prospects of repaying the loans were below average -- that is, "subprime"?

Government laws and policies, especially the Community Reinvestment Act, pressured lenders to invest in people and places where they would not invest otherwise. Government also created the temporarily very low interest rates that made the mortgages seem affordable for the moment.

1 comment:

Anonymous said...

What the government giveth, the government taketh away.