So says Erik Hurst:
Popular belief holds that if the government had better regulated the mortgage industry, the current crisis could have been avoided. At some level, this must be right: if the government outlawed mortgages altogether, there would be no one to default on a mortgage. But we must not risk throwing out the baby with the bathwater.
The whole essay is worth a read. Here are the important links:
Relaxing these regulations led to massive gains in the efficiency of the U.S. banking system. These aren’t just abstract changes in efficiency; they have touched all of our lives. Here’s a quick reading list of research showing that this deregulation yielded greater income growth; less volatile business cycles; better access to housing credit; offset racial discrimination in the labor market; and reduced crime.