I see that Tyler Cowen is back to touting his own form of “blame the victim” re the housing meltdown (link):
IT’S NOT JUST THE LENDERS There has been plenty of talk about “predatory lending,” but “predatory borrowing” may have been the bigger problem. As much as 70 percent of recent early payment defaults had fraudulent misrepresentations on their original loan applications, according to one recent study. The research was done by BasePoint Analytics, which helps banks and lenders identify fraudulent transactions; the study looked at more than three million loans from 1997 to 2006, with a majority from 2005 to 2006. Applications with misrepresentations were also five times as likely to go into default.
Technically speaking, the answer is: no, they cannot complain. To make a case for fraud, you have to prove not just “misrepresentation,” but “reliance.” Granted that a lot of the paper in the loan apps file would look bad in the Bulwer-Lytton bad fiction finals. But in spite—no precisely because—of that fact, the lenders cannot seriously claim that they were ever misled. If you hoik up some derelict off the street and tell him that you will fork over $1 million if only he will sign a piece of paper avowing that he knocks back $300 thou a year, why of course he’ll sign. There used to be a doctrine—maybe there still is—that a taker of negotiable warehouse receipt cannot claim to be “in good faith” if he takes from “a tramp or a professor.”
There also used to be as rule that “anyone who meets the definition of ‘good faith’…cannot be a ‘bank.’” But that takes us down a different path.
Footnote on “things we learned” in economics: I pluck my example out of
Update: Big Picture is a lot less kind than I am. DeLong has reservations. Paul Beard predicts: "Next up, how patients are to blame for malpractice. . ."
Mark Perry discovers that there are markets in everything.