Q. What’s the difference between a public health expert and an incompetent doctor?
A. An incompetent doctor tends to kill only one person at a time.
The deep recession and jobless “recovery” which we have enjoyed in the U.S. for going on three years now was triggered by the bursting of the housing bubble. The housing bubble was created by lending practices that awarded “subprime” mortgages to people with bad credit ratings, and offered to people with good credit ratings adjustable-rate mortgages (ARMs) that enticed them to purchase more expensive homes than they could afford.
Traditionally, banks were always reluctant to award mortgages, of any flavor, to people who obviously could not afford them, since doing so would wreck their businesses. The reason the banks began making bad loans in the 1990s is that new government policies, chiefly the Community Reinvestment Act, strongly “encouraged” them to.
The banks, being businesses, reacted logically to the new regulatory climate, to threats by ACORN and other activist groups, and to the escape hatch opened for them by the government which allowed them to turn over their toxic mortgages immediately to Fanny and Freddie. Banks quickly began turning out as many questionable mortgages as they could write, to as many uncreditworthy individuals as they could find. Read more »
*This blog post was originally published at The Covert Rationing Blog*