Mortgage Regulation

Bill Buckley has a recent article and has an interesting slant on “regulation” as it pertains to the sub-prime crisis. It even seems ole Buckley has fallen for the “new conservatism” mantra; large government well managed.

What the market would do, facing that situation, is to impose punishment on the disorderly mortgage brokers and lenders. But where are they? They are almost universally out of sight. They didn’t linger over the worthless mortgages; they passed them on to buyers who have been waking up during the past six months bereft of assets they thought they had.

If we could start from scratch, we might have managed a federal regulation that forbade giving mortgages to people without an adequate credit history. But we cannot do that in retrospect, so we are in mid-quandary, with foreclosures lowering the values of all houses, not just the ones with risky mortgages. Is there a market for, say, 30 million American homes?

I can’t say I totally agree with him. He advocates for the government to save the day.

The federal government being the only agent that can possibly intervene, it needs to do so, by forbidding the liquidation of mortgages until the disparity between true value and hypothetical value is pounded away by time and inflation — and a revitalization of the functions of the marketplace.

I agree with the revitalization of the marketplace, but why use the federal government as the agent of intervention?

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