Wednesday, December 05, 2007

Predatory Legislating

Dr. Brook just published an excellent piece in Forbes on the current legislation being proposed to regulate the lending industry. It follows an equally outstanding press release on the subprime issue put out by ARI directly.

I would only add that on top of everything they point out, there is a grave injustice in trying to freeze house prices at these uneconomic levels, viz. that those who were responsible and didn't try to purchase a home when they knew they couldn't afford it, are now being locked out of the market indefinitely thanks to the government bailout programs (not to mention that it will probably be their taxes that go to ensure they'll not be able to afford a home!).


Blogger Burgess Laughlin said...

Thank you for your article. It makes the issue personal. The issue is justice--for the good people and the bad people. Mainstream media focus, if at all, mostly on the bad people, the ones who are passing the predatory legislation and the ones they are supposedly trying to benefit with the special privileges that come from intervening in a market.

The direct victims, people in business, are vilified but otherwise ignored. The indirect victims, responsible individuals shut out of a distorted market, are usually forgotten. They become the debris pushed aside by a statist glacier.

Reading the daily news, while knowing the injustice on a personal level, becomes almost unbearable at times.

4:47 AM  
Blogger Amit Ghate said...

Thanks for the comment Burgess. I agree completely.

One of the prime virtues embodied in a truly free market is justice. Any breach of the market will result in an injustice, and in this case, since the housing market is so large, and the intervention substantial, the injustice is tremendous. Not only are responsible potential buyers punished as I noted in the post, but responsible lenders are too. Letting the consequences of poor lending practices fall to those who engaged in them would benefit those who were more circumspect in their practices, but with intervention and across-the-board legislation, that distinction becomes lost. I suggest listening to the podcast with John Allison that I'd blogged about a while back to see the type of lender who is being punished by being lumped in with the irresponsible.

8:42 AM  

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