Jackie Danicki

File this one in the “Issues that make people of all political stripes smell the chance of warm fuzzies” cabinet:

The conventional wisdom used to say the poor didn’t have enough access to debt. One of the earliest products of Franklin Roosevelt’s New Deal was the Home Owners Refinancing Act, which provided mortgage money to more than a million borrowers over a three-year period. Harry Truman’s record shows a consistent effort to expand the amount of debt available to willing borrowers.

…The sub-prime meltdown comes in a context of debt panic—specifically, of other-people’s-debt panic. Liberal economists, values conservatives, and hug-the-middle moderates are in full agreement on this one: Poor people’s access to debt is driving them to fiscal ruination or worse.

1) Who amongst us is so disabled as to be rendered incompetent to make decisions affecting our own lives? (I’d say, those who are insane or otherwise mentally impaired.)

2) Who wins if we set legal limits on lending terms? (I’d say, those who have no problem operating outside the law, and who are willing to collect on terms other than financial, such as broken bones and ended lives.)

…We can dispute the wisdom of federally guaranteed loans and mortgage purchasing, but it’s notable that the new economy…helped to create one of the greatest booms in the country’s history: the postwar suburbanization of America, which is now derided by our own bien pensant classes, who claim there’s too much ready credit out there. The difference now is that it’s coming from the market rather than a package of government guarantees, from an industry that expanded to fill a demand and is now contracting as the demand shrinks.

In a sane world, we’d say this is a market behaving as it should, and marvel at an economy where so many people who were once locked into the renters market have gotten a chance at homeownership. Some of them have blown their chance by exhibiting the same kind of behavior that made them bad credit risks in the first place. But most have not. In fact, about nine out of every 10 sub-prime borrowers are still making their payments.

Emphasis mine.

So our grandparents solved the not-enough-credit crisis, and Sens. Clinton and Dodd are well on the way to solving the too-much-credit crisis. What will they think of next? Whatever it is, there will be plenty of deadbeats, politicians, and people who can’t do math to cry that the sky is falling, even if home prices are not.

Filed under: Life