I appreciate Penny Lernoux's thorough and generous review of "The Thrift Debacle" (Book Review, July 2). I wish, however, to correct one error of fact and one misconception.

There were 4,600 thrifts in 1980, but the number has shrunk to 3,200. I argued in the book that at least one-third (not one-fourth) of these will not survive. If current conditions prevail and the Bush Administration enforces its proposed rules, the fallout may be much greater. The point is that an increased demand for mortgages by pension funds and an increased ability of mortgage bankers to originate home loans and convert them to securities has greatly reduced the need for and competitiveness of thrifts.

Lernoux criticizes me for ignoring the fact that "large numbers of people are unable to obtain affordable housing." Restricted affordability does exist, but primarily among the very poor or in a few metropolitan areas like Southern California, where demand and costs are high, largely because of governmental controls. Affordability is not restricted by any shortage of mortgage funds. If we wish to help some people buy or rent housing, we should do it with direct subsidies, not by propping up vestigial thrifts.

The history of such subsidies, which I rigorously supported, suggests, however, that it is very difficult to make them work.



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