Arnold Kling  

Ed Pinto on Mortgages

My Run-in With the Washington ... On National Education Policy...

The short version, in the Wall Street Journal (subscriber-only).

The long version, which is the definitive work on how housing policy affected mortgage lending. Pinto has access to good data. He has the institutional knowledge. He doesn't have an address at Harvard, Princeton, or Chicago, but I find facts more convincing than credentials.

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COMMENTS (11 to date)
Thomas Sewell writes:

The Google link to skip the subscription wall: Click on the first result.

I also find his analysis convincing.

Floccina writes:

It is funny how little discussion there is of Bush's Ownership society and how badly it worked out:

Ownership society is a slogan for a model of society promoted by former United States President George W. Bush. It takes as lead values personal responsibility, economic liberty, and the owning of property. The ownership society discussed by Bush also extends to certain proposals of specific models of health care and social security.

I am sure that it was a factor the question is was it a significant factor.

mark writes:

Thanks for this link. I am only a quarter of the way through but it is extremely impressive and resonant.

Colin K writes:

Earlier in the crisis I recall lots of commentators suggesting that the Fannie/Freddie/CRA/ACORN complex was either a symptom of or, at best, a sideshow contributing a few percentage points to a much larger breakdown in the system.

This account seems to suggest that the Tea Party narrative about the crisis being caused by the government forcing banks to give mortgages to deadbeats may not be so far off the mark.

ThomasL writes:


I agree in spirit. I use the term "ownership society" as a convenient shorthand for all these misguided housing policies.

The only thing is I'm not really aware how many, if any, of the policies implemented were really directed under that goal. I think "ownership society" was more slogan and soundbite than comprehensive policy.

Bad policies were certainly put in place, I'm just not convinced that was the motivation for them.

Steve Sailer writes:

Pinto's document looks very informative. However, I only saw the name "Bush" in it twice, and that's not enough. For example, there's no mention of the October 15, 2002 White House Conference on Increasing Minority Homeownership at which Bush called for 5.5 million more minority homeowners by 2010 and denounced downpayment requirements as standing in the way of racial equality.

Much of the problem Americans have had coming up with a coherent understanding of the causes of the housing bubble is partisanship: everybody wants it to be the Other Party's fault. In reality, the Other Party tends to be more constrained at giving goodies to their supporters for fear of criticism. In contrast, Your Party is more likely to stab you in the back because you trust them.

Chris Koresko writes:

Steve Sailer: Much of the problem Americans have had coming up with a coherent understanding of the causes of the housing bubble is partisanship: everybody wants it to be the Other Party's fault.

My own partisanship may be biasing my impressions here, but it seems to me that the Democrats are pushing the idea that it's all the fault of Republicans and Wall Street, whereas the Republicans admit some fault (including what you point out in your post) but argue that the basic problem was government interference in the market and that Democrats deserve the majority of the blame for it.

Steve Sailer writes:

"whereas the Republicans admit some fault (including what you point out in your post)"

No, the 2002 White House Conference on Increasing Minority Homeownership has largely disappeared down the Memory Hole. The Democrats won't touch it because they'd rather call Republicans racist than irresponsible, and the Republicans won't touch it because it makes them look bad.

Just Google "White House Conference on Increasing Minority Homeownership" and you'll see that half of the top ten pages referring to it are by me, including my comment here yesterday! But, do read Bush's speech to the conference which would be pure comedy gold, if the consequences weren't so disastrous.

Don Lloyd writes:

As someone who has never owned a house or even slightly wanted to, and who wouldn't willingly even make a down payment on a car, the proposed 20% down payment requirement on a purchase seems beyond imagining, at least for the majority of non-lottery winners. But maybe I'm wrong.

Let's say you have a 21 year old daughter with 1 year old twins. Your son-in-law makes $60K per annum and they pay $1500 per month in rent.

Please give me any reasonable combination of house price, monthly savings ( both in $ and as the multiple of existing rent) and time to reach a 20% down payment.

I would expect that trying to pay rent and accumulate a down payment at the same time would be near impossible for most people.

When it is claimed that 20% down payments were common in history, only the people who could afford it were counted, and all the people who could not were invisible.

As bad as it sounds, maybe what's needed is some kind of a modified rent-to-own arrangement. No equity accumulated until rent payments reach the 20% level (time value adjusted). How much equity is accumulated in the early payments of a mortgage anyway (I have no idea)?

Most home loans aren't going to succeed or fail based solely on the lender having 20% less dollars at risk.

Regards, Don

Colorado writes:

Don -
I don't know how others did it but getting to 20% can be done if my experience is any indication. I bought my first place, a condo, with a VA 100% loan. But it wasn't free, it cost me a couple years in the Army. I didn't have a child until I was 38 and the time between when I was married at 30 and 38 were some of my biggest money saving years. The condo netted a $10,000 profit that I invested in a rental property. I lived in part and used any extra money I made to fix it up myself. I refinanced that and bought more rental property and moved there. Between my regular job and the rental business second job, I was able save and finally made a 40% down payment when we bought our "adult house" at age 37. So work harder and delay gratification and you can get to a 20% down. Your example doesn't yield the same result because you have the deck stacked against your daughter.

steve writes:

Convincing? Sigh. He looks only at the GSEs and CRA and comes to the conclusion they were responsible. Limited data in, foregone conclusion comes out. I also appreciate how he uses the GSE share of the market in 2008, to make claims about their responsibility in creating the crisis. 2008 was when the investment banks were bailing.


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