Sean Andrews writes: >> > Subprime Suspects >> > The right blames the credit crisis on poor minority homeowners. This >> > is not merely offensive, but entirely wrong... >> >> Article URL: http://www.slate.com/id/2201641/ >> >> This meme was recurring on the PEN list last spring, mostly propped up >> by David Shemano. One of his fave sources, Stan Liebowitz just >> published a paper that tries to make this argument.
Hey, let's look at what I actually said on April 11: ----------------------- >> Did Liberals Cause the Sub-Prime Crisis? >> >> Conservatives blame the housing crisis on a 1977 law that helps-low >> income people get mortgages. It's a useful story for them, but it >> isn't true. I agree. The CRA was not "THE" cause of the housing/mortgage bubble. Anything so huge as the present bubble is going to have multiple contributing causes. Trying to quantify the contribution of the CRA compared to the other numerous contributing causes is almost impossible. I would go so far as to agree that a bubble would have occurred without the CRA, but that does not mean that CRA was still not a cause. ----------------------- I attended a very informative presentation yesterday from a senior level person at FTI Consulting (one of the leading providers of financial advisory services to distressed companies) who gave an overview of the existing residential real estate market. I will send the presentation to Michael and he can post it on his site. You simply cannot ignore that the rate of homeownership went from 64% in 1994 (in liine with the post-WWII average) to more than 70% in 2004. Does anybody seriously doubt that the increase in homeownership reflected anything other than the sale of homes to persons who could not afford the homes in any practical sense? I don't "blame" them from taking what was offered -- the chance to pay a mortgage instead of rent for a year or two. But let's not delude ourselves. The key question is why the increase occurred when it did. It can't be greed -- greed is always there. Why did residential building as a proportion of GDP reach its highest levels in 2005 and 2006 since immediately after WWII? Thank you Alan Greenspan for lowering interest rates. Thank you Wall Street wizards for the securitzation process and the separation of loan origination from loan administration. But THE critical factor is that WE THE PEOPLE, acting in a bipatisan manner through our elected officials, are somehow convinced that owning your own home is the American Dream and social policy should do everything possible to encourage home construction and home ownership, especially for people who can't obtain a mortgage in the absence of social policy. To this day, when it is plainly obvious that there are way too many homes on the market (the honeowner vacancy rate has moved from its traditional average of 1.5% to 3%, which represents millions of homes), politicians! and policymakers continue to repeat the mantra that the "problem" is that housing prices are too low and all we need to do to solve the mess is prop up home prices (while at the same time we apparently need to bailout homebuilders to ensure MORE home construction, because those are jobs, jobs, jobs). This is insanity. As long as we subsidize home ownership through tax policy, housing policy, banking policy, etc., we are going to have bubbles. You may need an Alan Greenspan or a Wall Street wizard to ignite the match, but the fuel was already there and will continue to be there until we collectively stop smoking the crack pipe of the alleged intrinsic beneits of home ownership. David Shemano _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
