Sowell: Politicians at Heart of Housing Boom (and bust)

This article about Thomas Sowell's new book analyzing the housing boom reveals some interesting points about the genesis of the housing meltdown. In particular, Sowell points to land-use restrictions in high-profile areas like San Francisco as having created artificially high property values in those areas.  This, Sowell claims, led to a surge in news reports about the rising prices for housing in those areas, even where property values were very affordable in other areas of the country. Congress over-reacted to this "false crisis" by juicing the Community Re-investment Act and forcing banks to make big loans to folks who couldn't afford them. Because the sub-prime loans featured high interest rates, the banks stood to make money if the borrowers could pay, and were protected if borrowers defaulted because Congress had ordered Fannie and Freddie to buy up loans made to low-income borrowers. 

In the story's final paragraph, Sowell identifies those he feels are the 'real' victims: taxpayers and homeowners locked into hopelessly oversold mortgages. The banks and mortgage investors are not in Sowells' list, because they have the political power to help themselves -- as shown by the recent TARP bailout (the largest in history). Individuals can help themselves, but they must engage a good lawyer who understands the issues to stand up for them.  Note that I said 'lawyer' and not 'foreclosure defense firm.'  The so-called foreclosure defense outfits have no legal power and generally exist only to part unfortunate homeowners from their money.