Posts Tagged ‘financial crisis’

There’s a good article in this week’s Economist entitled Credit Crisis dated April 3rd, 2008.  I’m an Economist by education and agree with the statement made in the article, that “Crises are endemic to financial systems.  Attempts to regulate them may do more harm than good.”

In listening to a recent talk show, one caller was a retired mortgage loan underwriter.  She spoke out about the current credit mess and said that the problem is not entirely the fault of lending institutions. 

When lenders allowed “stated income” instead of “proof of income” on loan applications, thousands of borrowers lied through their teeth and overstated their incomes in order to qualify for a house they basically could not otherwise afford.  In other words, they perjured themselves on legal documents.

So Democrats/liberals/big government hacks want to lay the blame entirely on lending institutions which is so idiotic and so typical of government reactionary tactics!  The blame should equally be placed on the borrowers who lied about their incomes to get a loan.  You can slap regulations on the lenders, but that does not excuse the false information that borrowers presented to lenders.  Borrowers should also be held liable for perjury, if nothing else, which in my opinion, should be a finable offense.

“The notion that the world can just regulate its way out of crises is thus an illusion.”  A sophisticated financial system such as ours has its ups and downs as institutions learn ever more complex ways of dealing with people.  But to simply create a tightly regulated financial system will “condemn an economy to grow slowly.”  One only has to look at declining economic growth in Europe.

Put some of the blame where it belongs – on borrowers.  Don’t give them a pass or offer to excuse their contracted obligations.  Lenders should go after those borrowers who lied on their loan applications and get judgments against them for perjury.  If they did not qualify to buy the house, they should not be offered government assistance to bail them out.  That’s like letting go of a murderer and punishing the gun manufacturer instead.  Idiotic!

Rewarding bad behavior on the part of consumers, which is what Democrats want to do, will only guarantee the perpetuation of more bad behavior.  Government should stay out of our wallets and private business.

Advertisements