The Next Financial Crisis

Everyone knows that our ongoing financial crisis had housing at it’s root. There have been lots of claims and counterclaims, but it’s clear that mortgage originators (banks and non-banks) took excessive risks. They had a lot of incentives to do so. Federal monetary policy and fiscal policy (in particular, housing) created an environment where banks had little choice. Guess what? – we’re doing it again! The urge to “help” low income families own homes, however unqualified they might be, seems pretty strong.

There has been considerable analysis of the mortgage mess and some of the better analysis has concluded that the single biggest problem with mortgage risks was low down payments. Guess what? – we’re doing it again! This time, the banks might be a little smarter. Government, on the other hand….

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