> "One advantage to the tax credit is that there's no moral hazard
> involved," one of Obama's economic advisers explains. "There's no
> sense in which you're rewarding someone for taking too big a risk. If
> you lied about your income in order to get a bigger mortgage, then
> you're not qualified. Do you really want to give a subsidy to the guy
> who wasn't prudent?"
--Because of course the lending corporations played no role in encouraging people to overextend themselves with loans! It fascinates me how economic wonks' discussions about foreclosures and bankruptcy focus on the assumed personal deficiencies of the borrower and do not analyze or critique the lenders' reckless practices. --Even according to the logic of capitalism, shouldn't lenders have to bear the consequences of their poor decisions about who they lend money to?
One anecdote to illustrate how the housing bubble even infected credit union lending: about 2 years ago I applied for a home equity line of credit at my teacher's credit union. No formal appraisal of the house was necessary, but the loan officer did "a quick check" on her computer and told me that the house was worth $278,000 (I know for some of you that live in big cities, that doesn't sound like much, but we're talking about a 900 sq ft ranch house in a working class Portland neighborhood).
About six months later, when housing prices were still rising in Portland, my wife and I decided to move, and we managed to sell the house for $207,000. --Even the credit union was massively inflating the appraised value of houses to encourage people to take out excessive home equity loans!
Miles