Tuesday, August 21, 2007

Damned If You Lend, Damned If You Don't.....

Yesterday, in this post, I provided a clear example, thanks to the Wall Street Journal's excellent article from last week, of how inappropriate financial behaviors on the part of everyone from borrowers to investors have helped to create the current, sub-prime mortgage-based credit market turmoil.

One point which I had planned, but neglected to add, was that, had the mortgage banking industry failed to provide something like sub-prime, piggyback mortgage loans, they almost surely would have been excoriated by some parties for denying 'affordable' housing finance to the less-economically well-off.

As if sensing my omission, today's Wall Street Journal carries a front page piece detailing Illinois' new steps to mitigate the assumption of undue financial risk and obligations, in the form of risky mortgages, by the economically less well-off in that state.

Sure enough, within the first few paragraphs of the article, regarding an earlier attempt at the same task, we read,

"Instead of winning plaudits, the pilot program quickly became mired in charges that it would make it harder for minorities to buy homes."

So, there you have it. At the same time that some are criticizing lenders and mortgage brokers for rapaciously victimizing the poor or less financially-educated who want to buy homes, attempts to minimize the recurrence of such inappropriate lending are already being branded as racist and discriminatory.

Damned if they lend to the poor, and damned if they don't.....the financial sector has become today's whipping boy for some who want the current credit turmoil magically vaporized, yet not by returning to older, tested home lending standards which resulted in higher-quality mortgages which could be more confidently securitized.

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