Rob Schofield over at Policy Watch offers up this painfully shallow piece on the subprime/foreclosure mess. It’s amazing at the incredible lack of depth in Schofield’s “analysis.” He understands economics about as well as I understand women’s fashion.
"How the heck did we get into this mess? There are a lot of reasons, but it mostly boils down to some toxic byproducts of Bushanomics – namely, a wildly under-regulated market of predatory corporations and a distressed middle class that’s having a harder and harder time staying afloat. As Banking Commissioner Joe Smith said, we used to talk about the housing downturn as being only about the "subprime" market. Now we know its reach is much deeper."
He blames things on a “wildly under-regulated market” while not mentioning a single regulation that has been stripped recently. More telling, there’s no mention of:
1) the HUD rules mandating that Fannie and Freddie finance a certain percentage of loans to “underserved” people
2) the fact that HUD had recently praised the lending industry for its “creativity and innovation” in developing new loan products (i.e. subprime and no doc) to help the underserved communities (mostly minorities) to attain a loan
3) the recently revealed fact that a large share of defaulted loans were taken out by people who lied on their loan application
4) international banking regulation which in the end directs large investor firms to increase their share of (high-risk) mortgage backed securities into their portfolio
5) the government-created oligopoly of credit rating agencies and the resulting perverse incentives for them to give high ratings to these risky securities
Then there is this statement:
is actually not as bad off as some states. This is mostly attributable to the fact that our state legislators and regulators have done a much better than average job in defying the right wing’s deregulatory push in recent years by passing anti-predatory lending and mortgage servicing legislation."
Actually, the states that are worst off are those experiencing the largest decline in housing values. NC is lucky to have experienced (until very recently) solidly growing housing values due to the population influx. As housing values in the state decline, watch the foreclosure rate increase.
Rather than examining some of the real forces at work, Schofield jerks his knee and takes his typical intellectually lazy route of blaming “Bushanomics.” Why look into the actual incentive structure of the process when you can just blame Bush and call it a day?