[clue-talk] The stimulus bill

[Jed S. Baer]

On Fri, 6 Feb 2009 21:23:30 -0500
Angelo Bertolli wrote:

> Subsidizing mortgages not withstanding, I think you'd at least agree
> that the mortgage crisis we're in right now has way more to do with
> banks/loan officers/whoever not doing their risk assessment "properly."

Can't imagine why you'd think I'd agree with that. There will, of course,
always be bad loan officers, and bad decisions made in the private
sector. One of the best remedies for this is to let the market punish
such actions, as it will, when allowed to do so.

But how about examining exactly who it was who incentivized this whole
housing bubble. This video is oversimplified, but nonetheless informative.

http://www.youtube.com/watch?v=1RZVw3no2A4 (bonus usage of music from
"Carmina Burana") (and yes, the pro-McCain schtick at the end makes me
gag)

And bad loan officers and lending institutions could not have gotten away
with such practices on the scale we've seen without the government's
foolish meddling. If nothing else, without being propped up by the
largesse of Fannie and Freddie, investors would have reacted quite
strongly. Because when money is on the line, bad loans won't get made for
long -- neither the banks nor their investors can afford it.

One of things mentioned by Thomas Sowell in his "Basic Economics" is the
fundamental principle that when you subsidize something, you get more of
it. Hence, when the feds subsidized sub-prime mortgages, of course the
number of them increased. This isn't a difficult concept to grasp.

jed