With the housing mortgage crisis it seems that state legislators are applying my first law: people will try to control everything, relatively. Since the states cannot do anything to save these mortgages which people can no longer afford, they are trying to stop it from happening in the future. But of course, like most things, good intentions lead to bad policy. This from the Wall Street Journal:
“As subprime mortgages continue to demonstrate the damage to borrowers and the economy when risky loans are made to sometimes unsophisticated consumers, politicians who once steered clear of limiting the availability of credit now find “fair lending” laws that cap interest rates more palatable.”
These pay day lenders give those with bad credit or strapped for cash a chance at saving their mortgages. Naturally, this is with higher interest rates. The problem the legislators see is that it is exploiting those who need money. I guess we see those who are higher on the demand curve as being exploited.
What will this do from an economic perspective? More than likely those who are above the cap in risk will not receive loans and those below it won’t be effected. So what does this accomplish? It makes those who have money and load problems have even bigger problems. Instead of getting a voluntary high interest loan in an attempt to save their mortgage, they won’t get one at all.
So people will lose their houses much faster! Good job! Good-bye Free-Market, Hello Nanny State.
The rest of the article is here.