Too much regulation

Sometimes regulation is all kinds of bad. At some point in the early nineties, our government voted in something they thought was wort while. A bill came along that said something to the effect "banks have to lend to minorities in order to boost minority ownership of private housing." This is really bad. Not that it has anything to do with minorities. It has to do with a mandate that says banks have to lend to people who may not be able to afford to pay the money back.

The real trouble is that the rules cannot be written to say anything like "People who are a minority get a lower interest rate." or "Minorities get a discount." This is considered not politically correct. This is why the term Affirmative Action has fallen from favor. People who do not qualify for the discounts scream bloody murder. Rightly in my opinion. Politicians say something like "There needs to be a sense of balance." In other words, "We need to hide the fact that some people get a break and some don't."  Now, even the banks do not know which loans are bad.

Bankers complied. They had little choice. Instead of just handing out money to some people so the banks could turn a prophet on others, the brilliant bankers came up with plans that let people get in to a house and hope to heaven the buyers would be able to refinance the loan after the bank sold off the debt to someone else. This is where Fanny and Freddy come in. Fanny and Freddy ended up getting stuck with most of the bad and many of the good loans. Remember, we don't know which are which any more. Fanny and Freddy can't sell anything off because no one is buying.

This is not so much a case of too much regulation. This is a case of really horrible mandates for the purposes of political correctness that cause far more damage than they fix. The purpose of business is to make money. Any time you inject something that is not fit for that purpose, you are throwing a wrench in to the machine.

Some highly intelligent person figured all of this out and said we need to insure all this stuff so when it all goes bely up someone will get stuck with the bill. See earlier post.