Housing Crisis Myths

The Liberal Housing Crash

By Christopher Chantrill

The American people are pretty well convinced that the mortgage meltdown was the fault of greedy bankers, stupid borrowers, and the odd Friend of Angelo Mozilo like Sen. Christopher Dodd (D-CT).  That's hardly surprising, since the mainstream media has shown a vivid lack of interest in getting to the bottom of it all.

That's why we have Thomas Sowell.  His latest book, The Housing Boom and Bust, is a workmanlike analysis of the housing crisis.  It's short enough, at about 50,000 words, for anyone to get through on a weekend....

Myth #1: The Housing Boom was Nationwide. No it wasn't.  It was concentrated in just a a few places. News reports and scholarly research have found that even during the boom affordable housing "has been the norm across most of the country, but with glaring exceptions[.]"  Writes Dr. Sowell:

Almost invariably... these are places where severe local government restrictions on land use, and other impediments to building, have driven the cost of houses and of apartment rents to levels that take as much as half of the average family's income[.]

In cities like Dallas and Houston where there are few restrictions on land use, home prices have not skyrocketed; nor have they collapsed in the downturn.  "In Dallas the home price decline was only 3 percent."

Myth #2: Greedy Bankers Foisted Sub-Prime Loans on the Poor.  Oh no they didn't.  It was government.  You see, liberal politicians and activists were convinced that banks were unjustly denying loans to minorities and low-income borrowers.  They even had studies to show that minorities were discriminated against.  The solution?  Force.  Liberals would force the banks to loan money to less-qualified borrowers.

Various community activists across the country have been able to pressure banks into making concessions in money or in kind, in order to get those activists to withdraw their objections to pending mergers or to banks opening new branches in another state, for example.

 Myth #3: Lack of Regulation Caused the Crisis.  Actually the regulators were part of the problem.  With the politicians cheering them on, the regulators were all over the banks forcing them to lower their lending standards.  And when the regulators finally did try to restrain the banks, the politicians reined them in.

When the Office of Federal Housing Enterprise Oversight... turned up irregularities in Fannie Mae's accounting and in 2004 issued what Barron's magazine called "a blistering 211-page report," Republican Senator Kit Bond [R-MO] called for an investigation of the Office of Federal Housing Enterprise Oversight, tried to have their budget slashed, and sought to have the leadership of the regulatory agency removed.  Democratic Barney Frank [D-MA] likewise declared: "It is clear that a leadership change at OFHEO is overdue."

These three myths are familiar.  They are verses from the favorite refrains of the liberal songbook.  You can also find them in the "whereas" sections of countless liberal Enabling Laws.  Whereas there's a national crisis; Whereas business is to blame; Whereas government doesn't have enough regulations: Now therefore...  more liberal administrative power is the answer.

Head over to American Thinker and read the whole thing