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CRA was too small to be a cause. In my view, people were getting loans they couldn't actually afford to pay off across the entire income spectrum. Low income people were simply the first to go under.

#2 - I thought we had already firmly established that the crisis was caused exclusively by Republican greed and deregulation.

1. Here is a more skeptical take, from a bitter man.

That's putting it charitably.

Reminds me of that Ask Dr. Science line:
"I have a masters degree. In science!"

"I'm a Doctor. Of philosophy!"

I graduated from college a long time ago, but even then the younger political science faculty were mostly a bunch of miserable leftists (like Ed at ginandtacos) who thought law school was too much work (not to mention selling out to the man), while the economics faculty of all ages were weird in an eccentric, funny and enjoyable way (like Tyler).

RE: 1

Education has and will always be up to the individual student. If you want to learn a subject, then the only disadvantage of online education is finding immediate feedback. But there are many specialized fora on the internet. If you post a question in the right place, people will answer it in a day or two.

Err... "Ginandtacos". Sorry about that, I kept picturing you as having an axe to grind...

How about some posts about why the rate of increase in higher ed tuition so vastly outstrips the rate of inflation?

Ginandtacos may be bitter, but he may have a right to be. It seems the advance degree con game is the biggest con game going in this country, with the possible exception of medicine. And even that is becoming less lucrative.

Interacting with other students probably contributes more to learning than interacting with teachers, or at least it did for me. It is the in between just being told the right answer to a hard problem and sitting alone in room stuck, with no idea what to try next, neither of which is a good way to learn. The next improvement in online education should be to have some sort of social networking connected to lectures so students can interact with each other.

...when the time comes for me to fire up the cortex for some serious Ratiocination...


Imagine starting a business today where you said to an investor:

"Well, all our employees are all PhDs and all our customers devote 40-60 hours a week to our product and spread the cost over most of their life through government loans because our customers don't have any of their own money. And that's the GOOD part!"

Reihan (Wow):

"If Harvard University remade itself into an institution dedicated to improving the quality of instruction in the developing world, would it do more good for the world than providing a small number of students with a quality education in a country club setting? My sense is that maybe — maybe — the answer is yes. Of course, this new model Harvard would lose a large and valuable stream of funding, namely donations from individuals who want their progeny to attend Harvard."

Did I mention "Wow!"?

CRA is the red herring for government's involvement in the housing crisis. CRA was a SMALL part of a much larger Housing Industrial Complex. According to Ed Leamer, residential investment has a disproportionate impact on GDP volatility. For decades, our federal and state governments have encouraged home ownership with subsidies, credits, guarantees, and GSEs for liquidity.

"Affordable" housing is the rubric under which these programs distorted purchases decisions. Bill Clinton's National Housing Policy permitted the subprime, Alt-A, Option ARM and securitization which led directly to this crisis. Low interest rates sparked the tinder of a search for yield, but without "affordable" products, the bubble would have burst years earlier. Look at house prices and realize that they began to outpace general inflation BEFORE the low interest rates of Greenspan. House prices became unhinged from inflation in exactly the year Clinton's policies (including a new CRA) hit the streets - 1996. Home ownership rates rose rapidly under Clinton and he took credit for it. Then Bush followed with his "ownership society."

Without the affordable products, people simply couldn't have afforded ANY mortgage at the inflated prices.

Clinton's HUD also pushed Wall Street and GSEs into securitization of these mortgages and gave GSEs affordable housing credits for purchasing subprime loans, something they wouldn't previously purchase. This created the 'originate to distribute' model of banking, flooded the market with liquidity, and created the demand for MBS.

CRA still forces banks to make loans they would not otherwise make based on credit. CRA loans were certainly a portion of the bad loans made. Regulators, academics, and Congress gloss over CRA default rates with further red herring papers about bank profitability.

And even after we began to slide deeply into recession, Congress and the President included more "affordability" provisions.

With hundreds of governments programs and dozens of agencies committed to increasing home ownership as an objective, why should anyone be surprised to hear it causes bubbles?

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