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Lax regulation in subprime crisis.(LETTERS TO THE EDITOR)(Letter to the editor)
Thank you for your excellent and clear explanation of the subprime mortgage problem ("Subprime: Tentacles of a Crisis," December 2007). It sorted out many questions I had.
However, there were some matters related to this crisis that I wish Randall Dodd had included in his analysis, such as the government failure of lax regulation and corruption at Fannie Mae. It would be interesting to examine the impact of the "trend fallacy"--namely, assuming the favorable upward trend in housing prices would continue indefinitely--that dominated thinking in the five years or so prior to the start of the crisis and the fact (as I have been informed) that about 40 percent of the houses built were "speculative investments" rather than homes built for specific buyers.
As I listen to endless calls for federal government assistance, these issues are often not mentioned. Not doing so masks some of the problems that contributed to the crisis.
James Angresano
Professor of Political Economy, The College of Idaho
Caldwell, Idaho, United States
The author responds:
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