Wednesday, May 30, 2012
What Saved Texas During the Housing Crisis? Government Regulation
This is something you didn't hear from Gov. Perry during his Presidential run when he was touting how well Texas has fared during the recession. Texas never had a housing bust because it never had a housing bubble like we saw in Nevada, California, Florida, Georgia and other places. The reason? Good, old fashioned government regulation, a legacy of the days when Democrats ran state government. In short, our banking sector is more highly regulated than it is in many other states and that has allowed many Texans to hang on to their homes during the bad times. For example, it is quite hard to get a home equity loan here. Until 1997, home equity loans were illegal in Texas. That year, voters approved a measure allowing them but with restrictions. You cannot take out a home equity loan or refinance your mortgage with less than 20% equity in your home. Plus, you may not refinance more than once a year. There have been plenty of other creative loan practices in Texas, and in areas where they have been widespread, foreclosure rates have been high. But overall, banking in Texas is more conservative than in many other places and that has saved us. Remember that next time a Republican tells you the government needs to get out of the way of business and we need less government regulation, not more. This recession was caused in large part because bankers got greedy and greed does not self-regulate. Smart regulation can help build a strong economy. You can read a good piece on this in the New York Times here.