Friday, March 1, 2013

Law-Prof Backs Government-Backed Mortgages; Shock Washes Over My Face

David Min, professor of law at UC-Irvine, has written the following for the LA Times as a preview for his upcoming article in the Harvard Journal of Some BS:

government guarantees appear to be crucial for promoting housing finance stability, in part because they promote loans that default at far lower rates than those originated by private capital in the absence of such guarantees. Policymakers interested in financial stability should consider these facts carefully as they consider how best to reform our broken housing finance system. If the federal government's footprint in housing finance grows too faint, it may once again mean disaster for borrowers, lenders, investors and the economy writ large.

Setting aside the specious merits of this conclusion (confounding variables, anyone? Bueller?), it's incredibly hard not to read this article as an anticipatory defense of government-guaranteed student graduate loans. Ming makes the suggestion that government backing lowered interest rates for low-end buyers than would otherwise get on the private market, which lowers the default rate. This is precisely the argument we in the money-making business of legal education need to be making now to ward off future attempts to cut the sweet crude of federal loans.

I don't know if Min intentionally did this (he's a financial markets expert new to the law school racket), but I'll be saving this article on the hard drive for when the Senate hearings approach.

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