Monday, October 6, 2008

Origins of the current crisis (2)

Sometimes you lose perspective, and it takes an outsider to diagnose your problem. In a superb article in today's WSJ, an Australian points out some critical flaws in our mortgage market: political interference with banks' lending practices, nonrecourse loans, no prepayment penalities, and to top it off, quasi-government agencies charged with making housing more affordable. That, not market failure or lack of regulation, is enough to explain the whole mess.

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