The Boston Globe let me get my two-cents’ worth in on the issue of our mortgage crisis — my letter to editor on the subject was published in its Sunday, August 3 edition. Here’s the link, and the full text is reproduced below:
Let market prevail
August 3, 2008The Boston Globe finds it “astonishing” that the Fed has to force lenders to do what they used to do out of simple self-interest – lend only to credit-worthy applicants (“An addiction to borrowing . . .,” Editorial, July 27). However, the editorial fails to examine how government regulation has perverted what is in banks’ self-interest.
Our banking industry knows that it doesn’t have to worry about the downside of lending to unqualified borrowers. Because of Fannie Mae, Freddie Mac, and the mandates of the Community Reinvestment Act, taxpayers ultimately foot the bill when borrowers can’t pay back loans.
It wasn’t always the case that banks could depend on the government using taxpayer dollars to pay for their bad decisions.
Government regulation made it in the self-interest of banks to try to sell credit to consumers without worrying about their ability to pay.
What is needed is not more regulation; we need to undo the damaging regulations that twisted lending incentives in the first place. Laws against fraud and other crimes are already available to punish dishonest practices. Government should cease economic regulation of banks, and let banks suffer the full economic consequences of the lending and investment mistakes they make.
PAULA HALL
Brookline
Score one for the good guys! ;-)
