The Predatory Lending Fallacy
I think we owe Greenspan a happy (belated) birthday. He’s gotten a bad rap the past few years for his failings as a central banker, and that’s just unfair. It should be about his failings as a regulator.
Pointer from Scott Sumner, who is grateful that O’Brien understands the subtleties involved in evaluating whether monetary policy is loose or tight.
We may cheer O’Brien for taking on a mistaken narrative of recent monetary policy history. However, in the process he reinforces a mistaken narrative of recent mortgage history, blaming Greenspan for failing to stop predatory lending.
Consider the following problems:
1. Qualified borrowers getting bad deals.
2. Unqualified borrowers getting good deals.
(1) is predatory lending. (2) is what caused the housing bubble and crash. Getting that story straight would be a major accomplishment for the media.