Tuesday, April 12, 2011

Response to letter to the editor about going back to limited government

In Romelio Carta’s letter of a few days ago he blames loans
to low income individuals for the banking collapse when in
fact low income individuals have a very strong record of
paying their mortgages. What actually imperiled the banking
system was predatory lenders doing a hard sell on variable
rate mortgages to unsophisticated buyers. In addition there
were plenty of financial incentives to loan money to
unqualified buyers in order to collect the up front fees and
the lending institutions knew they had no intention of
keeping the loans because they would resell them in the form
of a package that investors would buy.

Mr. Carta’s solution for our economic problems is: “Let's go
back to limited government and the free market capitalism.
This system brought the United States to be the most
prosperous nation in human history?” Unfortunately free
market capitalism is exactly what caused the banking
collapse that imperiled our economy and obliterated the jobs
of millions of Americans by failing to regulate the actions
of all too many banks, mortgage brokers and insurers.

Our economy has been strongest when it was heavily regulated
in order to protect individual investors. Remember that the
best known banking collapse “The Great Depression” was due
to failure to regulate banking activities, over the last two
decades the regulations put in place as a result of what was
learned from that devastating experience were systematically
removed and we once again have suffered another collapse.
Coincidence? I think not.

1 comment:

  1. Published in the New Braunfels Herald-Zeitung April 12, 2011