Status Updates From The Housing Boom and Bust: ...

"What the government buys with the enormous sums of money it dispenses is the power to give orders to the recipients that the Constitution never authorized them to give. Politicians are, in effect, buying up our freedom with our own tax money."

"The current economic crisis itself grew out of politicians intervening in businesses and markets, making decisions for which they have neither experience nor expertise--much less a stake. To extend the same principle to other sectors of the economy is to invite a wider disaster, rather than an end to the current crisis."

And there it is--the gist of the whole book.

"The purpose of government is not to exercise every conceivable right it has, but to exercise whatever wisdom it has for the benefit of the country."

... "In this latter case, it doesn't matter how slowly spending gets underway. What matters is the law gets passed while the public is panicked, and before any opposition can get organized."

"If the purpose was to get the current economic crisis behind us, then the slow-moving policies passed in haste make no sense. But, if the purpose is to use the current crisis to create enduring changes in the institutions of the American economy and society, then the haste makes perfect sense." ...

"The larger question that remains as relevant as ever today is, was it the free market that led to the massive unemployment that persisted throughout the decade of the 1930's, or was the Great Depression prolonged by the government interventions that were intended to shorten it?"

"When you open the floodgates, you cannot tell the water where to go. Housing speculators--flippers--found the new and looser home mortgage rules a bonanza. So did others. It is by no means clear that the poor, or minorities, came out ahead at all after the housing boom turned to bust and many were left with mortgage payments they couldn't meet on homes they couldn't afford."

"Few things blind human beings to the actual consequences of what they are doing like the heady feeling of self-righteousness durring a crusade to smite the wicked and rescue the downtrodden."

"More generally, what is called a solution in politics is often simply a patch put over problems caused by previous political solutions, which in turn were patches put over other political solutions before that. What never seems to get through to many politicians, or to supporters of political interventions in markets, is that policies have repercussions far beyond the particular goals of those policies."

"Survival in the market often requires recognizing mistakes and changing course, while survival in politics often requires denying mistakes, continuing the current policies, and blaming the bad consequences on others."

"But there is no such renunciation of pet notions in Washington. On the contrary. Politicians who have played a major role in ruining the housing market are now eager to try their luck intervening in the automobile industry, and other sectors of the economy."

"However easy it may be for politicians to ignore the economic repercussions of their decisions, the costs of such repercussions are virtually inescapable in the marketplace, for they are reflected in prices--even if the individual decision maker has no clue as to why those prices are what they are."

...who will have to pay off a national debt created by politicians who throw around the word 'trillion' like to the point where it has become familiar enough that its magnitude and dangers no longer evoke the alarm that they once would have."

"The collapse of this solution now confronts the country with a still bigger problem, for which yet a new solution is being proposed--with the prospect of still bigger problems for this generation and for generations to come, ...

"Dealing with this problem by launching nationwide housing crusades to create affordable housing through mortgage lending quotas and riskier lending practices tries to solve one problem by creating another."

"The political pressures to meet arbitrary lending quotas--set by officials with the power of economic life and death over banks, and over Fannie Mae and Freddie Mac--led to riskier lending practices than in the past."

"The bedrock question then is, why did to many monthly mortgage payments stop coming? And the bedrock answer is, because mortgage loans were made to more people whose prospects of repaying them were less than in the past."

"Not only politicians, but social crusaders of various sorts as well, seldom count the costs or weigh the further repercussions of what they are advocating. Tradeoffs do not make for rousing rhetoric, dramatic placards, or catchy bumper stickers."

..."The power of a vision is shown not by the amount of hard evidence or logical analysis it has, but precisely by the fact that it needs neither of these things to succeed politically. The current economic crisis is just one of the fruits of the political success of rhetoric and visions."

"Most of the rhetoric of preservation cannot survive even a modest amount of scrutiny. But politically, there is no reason why it must." ...

"Since the fundamental problem of any economy--whether capitalist, socialist, feudal, or whatever--is the allocation of scarce resources which have alternative uses, the fundamental policy issue is why the government should intervene to direct those resources to one citizen rather than another. This is especially so in the United States, where the Constitution decrees equal protection to all Americans."

"In the case of a bank, just the existence of such a lawsuit can freeze the bank's ability to make and carry out business decisions that require the approval of government regulatory agencies. With both regulatory agencies and law enforcement agencies equating statistical disparities with discrimination, banks across the country began to settle cases out of court."

"In a column titled: How to Rob a Bank Legally, economist Paul Craig Roberts said, "Believe it or not, there were no individual complaints from minorities." Here, as in the Sears case, statistical disparities were enough for a lawsuit--even if there was not one flesh and blood human being who even claimed to have been discriminated against personally."

"What such omitted facts might imply was that financial and behavioral differences among groups can lead to differences in mortgage loan approval rates, among other things, whether or not race as such was the basis for approval or non-approval. But this inconvenient possibility was eliminated by leaving Asian Americans out of the picture."

"Other data in the 1991 Federal Reserve study, and a later 1992 study, show that whites were denied conventional home mortgage loans more often than Asian Americans. Later studies also show that whites resorted to subprime loans more often than Asian Americans. But these facts were almost never reported in the media."

"Significantly, seldom do widely publicized racial comparisons include Asian Americans, even when data on Asian Americans are available in the same data from which black/white comparisons are made. This is a crucial omission, as we shall see, for including Asian Americans would undermine the conclusions and the methods used to reach those conclusions."

"The issue is the cause of statistical differences in approval rates, not whether any group is shut out of the market."

"Social dogmas and the visions behind them die hard, and sometimes they refuse to die at all, when those who have those visions pay no price for being wrong."

"It is certainly true that neighborhoods with better housing also usually have more stable families, better-educated children, and lower crime rates. But statisticians have long pointed out that correlation is not causation; though that may be the most often ignored lesson in statistics."

"As with the affordability argument, we must compare the vision with the imperial reality."