It's big news! The federal reserve chairman is going to "crack down" on this horrible problem of "abusive mortgage lending." Then everything will be wonderful. People won't be poor any more. And it's for the children. Isn't this great?

I just have one question -- what is "abusive lending?"

If I'm hungry and borrow $10 from you so I can buy lunch at McDonalds, and I agree to pay you back $12 tomorrow, is that "abusive lending?" What if you tell me that you'll only give me the $10 if I pay you back $20? But what if I'm really hungry and have the money and WANT to pay you the $20? What if you will only give me the $10 if I pay you back $100 tomorrow -- but I REALLY want the Big Mac, and I'm willing to give you the $100 tomorrow. Is THAT "abusive lending?"

What if I own a house and am renting it to someone? What if my mortgage payments are $750 a month, but I charge them $1000 a month? Is that "abusive?" How about if they want to buy the house from me and I agree -- but still charge them $1000 a month (which they've been paying and can afford)? Does that reach the magical threshold of "abusive lending?" Or how about if I charge them $1,001?

In order for their to be ANY level called "abusive lending," there has to be a level that is "correct" lending. However, in a free economy, there absolutely can be no such thing. How much is a rock worth? It's worth whatever the person who wants the rock is willing to pay. So if there's to be a "correct" level of lending, that can only be an arbitrary number, enforced by government with guns. So much for any concept of economic freedom.

Posted by: Ogre at 01:04 PM | Comments (8) | Add Comment
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