Posted by
Always To The Right on Monday, March 31, 2008 10:08:38 PM
Still, the idea that the government can simply wave a wand and everything will be better is naive. Usually it's government itself that causes the problem — and then blames industry for it. That's certainly true with the subprime crisis.
Those old enough remember the
Community Redevelopment Act of 1977, which in essence compelled banks
with U.S. charters to lend to people who didn't have sterling credit
histories. The idea was to help poor, deserving minorities get access
to credit and homeownership.
But banks and mortgage lenders started putting marginal credit risks
into homes they clearly couldn't afford. Today, according to Goldman
Sachs, the unwinding of this problem will cost upward of $460 billion
in the U.S., and more than $1 trillion globally.
But we also think that, at the end of the
day, the government must operate under a kind of Hippocratic oath:
First do no harm. A corollary to that is: Markets must be allowed to
work. Any reform that doesn't do that is sure to be a costly failure.