Atlanta,  Economics

The market has spoken

This editorial from the AJC is an annoying example of the current hysteria about subprime loans

Describing the wreckage of the subprime mortgage collapse as part of the normal business cycle is akin to characterizing the devastation of New Orleans as the aftermath of a seasonal downpour.

In both disasters, human blunders and government inattention played pivotal roles. And the market can no more be counted on to fix the subprime mess than Mother Nature could be trusted to fix up the mess after Hurricane Katrina.

Government must intervene quickly and firmly in the subprime fiasco, in helping desperate borrowers keep their homes if possible and, more important, in ending abusive lending practices that contributed to the national leap in mortgage defaults and foreclosures.

New federal and state laws must couple strong prohibitions against abusive lending with equally strong enforcement and consequences. The pain must be felt by the duplicitous mortgage brokers who talked the homeowners on Elm Street into loans with hidden brokerage fees and unnecessarily high interest rates all the way up to the investors on Wall Street who profited from the bundling and selling of these subprime loans.

The article then goes on to describe several cases of fraud that happened in the Atlanta area, fraud as everyone knows is already illegal. Foreclosure and the denial of credit IS the marketing working, mainly in stopping people from buying homes they can’t afford. Absent fraud, no one is forced into a mortgage, and everyone knows how much they’ll be paying.

I suppose I’m more sensitive to this now (having just bought a house) than most times, but it’s quite maddening.

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