Where Have We Seen This Movie Before?


 

The Washington Post reports,

Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

The government should have tightened credit standards in 2005, when the housing market was taking off. It did the opposite. The government should have leaned against tightening in 2009, when the housing market was depressed. It did the opposite.

Maybe the government is getting it right this time. But (a) I don’t think they will get it right all the time and (b) when they get it wrong it’s you and I who pay the price.

Betting on the direction of the housing market is a job for private speculators, not government officials.

If government officials would take this lesson, they would at least have some basic understanding of mortgage lending decision analysis.

Where Have We Seen This Movie Before?
Arnold Kling
Sat, 06 Apr 2013 12:59:41 GMT

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