Erasing excessive loan fees

Federal rule would zap lenders' referral power for third-party services
Published on Oct 18, 2010

"(Economist) Joseph Stiglitz argues that markets in which information is less than perfect can work better with government intervention. You continually emphasize the information problem faced by borrowers in the home loan markets. Hence, if you agree with Stiglitz, you should be a strong interventionist, yet most of what you write is critical of government intervention. How do you explain that?" It is very simple. The Stiglitz argument is that when information is imperfect government might improve the market, not that it necessarily will.To argue that government will always improve a market when information is imperfect assumes that governments are perfect, which is perhaps even less tenable a view than the view that markets are perfect.Imperfect governments can make imperfect markets even worse. When that happens in the home loan market, I rant about it. Unfortunately, it is more the rule than the exception. The most direct way for government to deal with the d...