Government intervention, stupid!

President Bush’s plans to bail out subprime loans by freezing interest payments for adjustable mortgages is ill-conceived enough.

But did you know that it was another government intervention that goaded these people into making those mistakes?

That is exactly what Economist Walter E. Williams is saying in an interesting-commentary for the Washington-Post >

Like most economic problems, we find the hand of government.

The Community Reinvestment Act of 1977, whose provisions were strengthened during the Clinton administration, is a federal law that mandates lenders to offer credit throughout their entire market and discourages them from restricting their credit services to high-income markets, a practice known as redlining.

In other words, the Community Reinvestment Act encourages banks and thrifts to make loans to riskier customers.

Via Adam Smith Institute