NYT: The Foreclosure Crists

May 8, 2008 at 9:04 am Leave a comment

I wanted to take this time to comment on a letter to the editor published in the New York Times yesterday titled The Foreclosure Crisis.

It is not surprising that the same lenders and brokers who brought us the subprime mortgage disaster are now lobbying against the relatively mild proposals under consideration to regulate high-cost mortgage loans (“Lenders Fight Stricter Rules on Mortgages,” front page, April 28).

What is surprising, and frankly shocking, is that the Federal Reserve board, after all that has happened, may buy those anti-regulation arguments once again. Deregulation of the American lending industry deserves much of the blame for the subprime mortgage frenzy, and the economic crash it produced.

If you take a brief look at the birth of the subprime mortgage, it was actually brought about by legislation during the Jimmy Carter debacle. Carter himself approved the newly proposed adjustable rate mortgage.

“One lesson we should all be able to draw from the foreclosure crisis is that the government has a duty to protect and inform consumers about what is not only the biggest investment most individuals make, but also the cornerstone of family wealth and community stability.”

I completely disagree. I believe consumers need to educate themselves and learn what’s best for them. It is not the government’s job to teach the American people about major purchases. Sadly, most consumers spend more time researching frivolous, entertainment purchases than they do larger purchases like cars and real estate.

Yes, the government has a role to play in protecting consumers, but ultimately, the responsibility falls on the shoulders of the American consumer.

The Federal Reserve board should ignore the cries of an industry that argues that preventing it from engaging in unfair or deceptive practices will put it out of business.

Last I checked, the subprime mortgage market has completely collapsed. It wasn’t, however, due to government intervention, but a result of a free economy.

Instead, the Fed and Congress should listen to consumers and its advocates, who are begging for help and demanding fair play in the marketplace.

In a free market economy, changes occur when consumers pay attention. Not when the government decides to join the game. In fact, the last time the government stepped in, the adjustable rate mortgage was created. Is that what we really want?

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