The Absurd Report

At the center of the housing crisis, we’re told, is some one called the “predatory lender.”

He gulled poor people into taking mortgages “designed to fail,” as Hillary Clinton has put it, and as the housing market collapsed, he enjoyed the resulting foreclosures. The predatory lender sucks the life out of the American dream, and only new regulations can stop him.

But the real cause of the housing mess is a classic bubble in the housing market, the bursting of which has hammered lenders as well as borrowers. If the market had continued to rise, we never would have heard complaints about subprime loans. In fact, Washington had long encouraged these sorts of loans through the Community Reinvestment Act (CRA) as a way to make marginal - largely minority - borrowers into homeowners.

What’s the difference between socially responsible loans extending the American dream to deserving people with poor credit histories and predatory lending? It’s whether those loans work out or not. If they don’t, lenders suddenly become “predatory.”

Strangely, the more “predatory” they become, the more likely they are to go out of business under the weight of worthless mortgages.

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Tags: Economy

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