billroper | (Reply)

From:

carolf.livejournal.com

I disagree with you on the most significant regulatory failures responsible for the current mess.

A. Home ownership as an American Value (and therefore worthy of governmental support and encouragement) is not a phenomenon of the 1980s or 1990s. Rather, it's been an American Value since post-WWII. And there are sound financial and social reasons for the encouragement.

Ownership spreads responsibility. When you own something, you take care of it more than if you don't. Home ownership gives owners a real stake in the health of their neighborhoods. Home ownership, like marriage and children, give optimum motivation for individuals to take care of one another. That latter is the glue of social structure.

While that may sound "liberal" (TM) -- you know, the bad word as opposed to the normal word -- it really isn't. At a basic level, the only reason we join in societies is because we can do more together than any of us can do alone. Mutual enlightened self-interest. Without it, each person is an individual nation-state.

I will agree, however, that the push for home ownership changed in the 1980s and 1990s. All that Reaganesque optimism was part of it. But mostly, it was the generational remove from the GD. The financiers coming into the full flush of their careers then simply didn't believe that risk was as high as it really was. When you exist at the end of the pendulum swing, it's hard to see that it will swing back -- the end is the norm.

But the encouragement of home ownership was very good for the US economy for much longer than it's been bad.

B. I don't accept your premise that the Freddies are at the root of the bad mortgage market. Comparatively speaking, the Freddies were much more lightly involved in the sub-prime machinations than the private institutions. The level of involvement seems to me to be inversely directed to the level of regulation. The Freddies were on their way to full privatization, but not there, yet. For which, at least right now, we should be very thankful. This latest economic upheaval is a great argument against privatization of Social Security.

So, what do I think are the two greatest regulatory failures? See next comment (I ran over the LJ limit on comments. Am I talking too much?)