Mortgage Mess Was 100% Avoidable

Lax oversight has huge cost, American Prospect editor writes
By Jonas Oransky,  Newser Staff
Posted Aug 29, 2007 7:39 PM CDT
Mortgage Mess Was 100% Avoidable
Eileen Griffin is trying to sell her house in Cheshire, Conn. Friday, Aug. 24, 2007. Like many, because of turmoil in the mortgage market, Griffin is having trouble finding a buyer. (AP Photo/Douglas Healey).   (Associated Press)

Blame for the current economic disaster should be placed squarely on the shoulders of the US government, for deregulation that allowed speculators to cash in, writes the American Prospect’s Robert Kuttner. Helping boost "ordinary people" into the "propertied class" has fallen out of favor in Washington, with the savings and loan crisis a precursor to the current mess.

Deregulation under Ronald Reagan gave us today's ill-fated, laissez-faire mortgage industry, in which some lenders "loosened credit standards far beyond the point of prudence." Lest the perverse system belch up more disaster, Kuttner urges, the government must re-regulate lenders and get back into the business of subsidizing mortgages—making sure "mortgage lenders serve as responsible creditors, not predators." (More subprime mortgages stories.)

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