Posted by
Andrews on Monday, May 11, 2009 2:17:22 PM
I have one question, when have you ever heard of a law that forces people to follow their own inclinations? Do we have to pass laws telling people to buy the things they like? To eat their favorite foods? To take as much as they want of things they desire? Or to breathe? Of course not. Laws are enacted for two purposes, to prevent people form doing harmful things that they might otherwise wish to do (eg. to not steal no matter how much they want something), or to do things they might not otherwise want to do (eg. to pay their taxes, though they would rather keep the money). I cannot name a single law or regulation which was enacted to force people to do something they would do anyway, or, the reverse, to prohibit them form doing something they would not do anyway.
It is this observation that makes me laugh whenever the left tries to blame "Wall Street greed" for the sub-prime lending crisis. If subprime loans were such a bonanza, why would we have not only had to pass the Community Reinvestment Act, but then modify it 20 years later? And not only that, but also offer various indemnification for the purchasers of such loans through Fannie and Freddie? We don't have to offer protections to the purchasers of profitable securities, so why for subprime loans?
The reason is obvious. Subrpime loans are a losing proposition for lenders, and a risky purchase for buyers. So risky, that buyers had to be guaranteed a return through fannie and freddie. That indicates to me that they were hardly a route to quick riches, but rather threatened pretty serious losses, but for the government's intervention.
All of which makes these charges of "greed" even more ludicrous. The government not only encouraged the making of these loans, but also backed community groups which threatened prosecution against lenders who refused to make enough of them. Then, to make the loans marketable, the government secured them. Yet now they are blaming those who did what the government wanted and bought them as "greedy", and the lenders who made these loans as "predators". However, had no one made these loans, and no one bought them, then the government's desired result, the lending of more money to bad credit risks would have never taken place. The only reason such loans exist is because lenders were willing to lend the money, and they were willing to lend, at least partly because they knew they could sell bundles of these loans on the market.
So, please, could someone explain to me how these people, who acted only grudgingly, and only because of a combination of government incentives and activist threats, were "greedy" and somehow responsible for our current situation?