That’s the conclusion of this editorial in today’s Wall Street Journal, regarding bills to protect against “predatory lending.” By trying to make sure that no low-income home buyer ever suffers a loss, the result is to dry up credit for a wide swath of low and moderate income people.
It’s the old story of the unintended consequences of tampering with the natural order of things, in particular freedom of contract. Tilting the scales toward one side of the bargain inevitably has bad results for many of the supposed beneficiaries.
But then that’s another excuse for more legislation.
A considerable number of House Republicans went along with the bill in question, Barney Frank’s “Morgage Reform and Anti-Predatory Lending Act of 2007.” That led the Journal to comment, “Ironically, these House Republicans are now to the left of Senate Banking Chairman Chris Dodd of Connecticut. Mr. Dodd said last week that he may leave it to the Federal Reserve to issue new regulations to curb abusive lending.” I wonder if Dodd sees the irony in that. If it weren’t for the Fed’s having deluged the nation with credit over the last four years, we wouldn’t be in this mess at all.
