Blame a failure of public policy

Re: “Don’t blame the victims,” editorial, Oct. 25

You state that “the more fundamental problem is that too many mortgage brokers, lenders and investors stopped caring whether loans could be repaid.”

However, the borrowers stopped caring as well. After all, it takes two parties in agreement to make a transaction. You did not state the fundamental problem of this economic disease, just the symptom.

Human nature has remained basically unchanged throughout the centuries. It is not reasonable to ascribe economic crises solely to such foibles as greed, not caring or imprudence. If these human qualities are responsible for periodic economic crises, then mustn’t they be absent during the many long periods of economic stability?

No, the crisis is squarely a failure of public policy by the federal government. Since 1913, when the Federal Reserve was created, government policy has interfered with the credit market and money supply. Central planning by the Federal Reserve, which gave us artificially low credit rates, contributed to the bubble.

It was exacerbated by a public policy that encouraged irresponsible loans by other organizations created by the government, such as Fannie Mae and Freddie Mac, and legislation such as the Community Reinvestment Act -- all of which massively interfered in the free market.

Borrowers and lenders act in response to specific financial conditions.

When government policy promotes irresponsible behavior by interfering in the free market, we should neither blame the free market nor scapegoat the individuals who acted in their own self-interest in response to prices and loan guarantees caused by bad policy.

Stan Warford

Malibu