Sunday, September 11, 2011

Policy Folly without a Clue

The Bee had an article this morning which was remarkable, if for nothing else than its disconnectedness.  The opening paragraph stated "Their homes are gone, their credit is shot and their rent is often more expensive than a mortgage payment."  It then went on to suggest that the downturn caused by the mortgage meltdown weighed more heavily on African Americans and Hispanics.  The article argued that many lower income borrowers were "forced" into the higher risk loans because that was all they could afford.


What was absurd about the article is that the writers did not seem to have a clue that public policy designed to assist actually worsened the problem.  The Community Reinvestment Act; the demands of members like Barney Frank for more lending to low income communities and the pressure on Fannie and Freddie to increase their leverage - all contributed to the loan bubble that put these borrowers even more behind the eight ball.


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