Poor People Didn't Ruin the Economy

[From 9/21/08, in response to a Walter Williams column about the U.S. financial crisis.]

To the editor:

Contra Walter Williams (“Economic crisis stems from failure of government policy,” September 21), anti-redlining laws simply attempt to force banks to apply the same criteria to all potential borrowers. Such laws don’t force banks to make loans to bad credit risks. The banks decided to do that themselves.

Mortgage lenders made loans to people with bad credit on the belief that rising housing prices would keep the notes out of default. Buyers were encouraged to purchase upscale homes they really couldn’t afford. Unsurprisingly, buyers thought this was a great idea. Why live in Madeira when West Chester is calling?

Traditional redlining schemes denied loans to middle-income blacks and Hispanics that were made available to lower-income (i.e., riskier) white customers. Laws that restricted such practices had almost nothing to do with our current problems.

It’s strange how so many are blaming the poorest Americans for our current financial crisis (when they’re not blaming Bill Clinton, that is). Don’t middle- and upper-class Americans who just couldn’t be satisfied with what they had need to assume some of the responsibility too?