Mystery score

Mystery score

Sunday, September 07, 2008

The Cost of Not Regulating

Conservatives like to tell you that they're against government regulation because of the cost to business of bringing their operations into conformity with the law. What they don't tell you is the tremendous cost of not regulating, which so often is passed on to the taxpayers, that is, you and me:
  • Fannie Mae and Freddie Mac need a bailout, owing to poor oversight of the mortgage markets over a period of years.
  • It's likely to be the biggest government bailout ever. You and I are paying for it.
  • By the way, Fannie and Freddie have less capital than they have been claiming, auditors have found.
  • The federal government was warned repeatedly subprime lending was going to cause huge problems. These warnings were ignored, because conservatives believe the market can solve all problems, and because the lenders who made money hand over fist during the housing bubble somehow thought the rules of lending had changed, and you could spread out risk by securitizing and repackaging mortgages. 
  • Guess what? Good underwriting and lending only to creditworthy people who understand what they're getting into works a lot better than securitizing mortgages.
  • Millions of people who would have been better off renting are in foreclosure because of underregulated subprime lending and the misrepresentations of lenders.  
Better consumer protection laws and stricter regulation of lending could have prevented this debacle. Did I mention that we will be paying for this? It's the conservative way: privatize profits and socialize losses. Or, putting it another way, the cost of not regulating.

1 comment:

D. said...

Conservatives don't seem to understand why there were regulations in the first place: Because people are not saints. Although they have no problem enacting morality into law, because people are not saints.

I'm linking to this.