General hysterics about the subprime fallout and associated calls for government intervention make perfect demogoguery fodder for pundits, presidential candidates and economic illiterates. But if you’ve been looking for an intellectually honest, well-researched and thorough post mortem? Here’s your paper.
Zywicki and Adamson not only caution us not to regulate away the aspects of the mortgage lending system that enabled millions of people to own homes at all, but not to forget the checkered history that lead up to crisis and helped to create it. In other words, blame is to be apportioned evenly among government regulators, the fed, lenders and borrowers themselves. The point of regulation going forward should not be to bail out irresponsible lenders or create impeditments to ownership, but help lenders correctly to gauge risk and to ensure abuses by either party are curbed.
The authors ask reasonable questions about the "optimum" level of foreclosure, and caution us not to forget the types of speculative investments that count among the foreclosures.In short, this is a rich complicated account written by talented economists. But it’s a breath of fresh air compared to what you read in the papers.