Predatory Legislators

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millions of homeowners now struggling to repay money they clearly
never should have borrowed, our leaders have been righteously wagging
fingers at predatory lenders who allegedly enticed innocent borrowers,
and the country, into a financial snake pit. While the mortgage
industry clearly deserves a good share of the blame, unindicted
co-conspirators abound. The ringleaders are still at-large and are,
in fact, busy hatching a plan to dwarf the earlier mistakes.

Contrary to
the message bouncing off the marble walls of the Capitol, most borrowers
in the inflating housing bubble clearly understood the terms of
their loans. Most knew that they could not afford their mortgage
payments once their teaser rates expired, but enthusiastically jumped
into the debt pool anyway believing that guaranteed real estate
appreciation, or a quick and profitable sale, would keep them afloat.

Although both
lenders and borrowers were acting in their own perceived self-interest,
what can we say of our economic policymakers who are expected to
protect the good of all? Their actions encouraged the whole sad
circus. Were it not for the excessively low interest rates provided
by the Fed, the lax lending standards and moral hazards supplied
by Congress courtesy of Freddie, Fannie, and the FHA, and the many
real estate subsidies built into the tax code, none of these predatory
loans would have been possible.

Had lenders
exercised better judgment and had borrowers avoided overly burdensome
debt loads, both parties would clearly be in better financial positions
today. Instead, as borrowers were demanding the credit to fuel their
dreams of instant real estate riches, lenders were being ordered
to accommodate them.

the rest of the article

21, 2009

Schiff is president of Euro Pacific Capital and author of The
Little Book of Bull Moves in Bear Markets
and Crash
Proof: How to Profit from the Coming Economic Collapse

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