This is the Cato Daily Podcast for Tuesday, March 9, 2010.

I'm Caleb Brown.

A proposed agency to protect the public against the perils of predatory lenders rests on some troubling canards according to

Mark Calabria, director of financial regulation studies at the Cato Institute.

For example, he argues credit wasn't too expensive over the last decade. If anything it was far too cheap.

A lot of this starts from a very general argument of whether one believes that the financial crisis, the housing bubble, was caused by predatory

lending, essentially credit being too expensive and abusive, or as people like myself take the position that it was caused by credit being too cheap and too friendly.

How do you make the argument, help me, be Chris Dodd for a little while.

How do you make the argument that predatory lending is expensive credit?

Well, of course what they would say is predatory lending strips equity out of your home,

predatory lending charges you fees that are unreasonable. Predatory lending tricks you into taking a loan that you wouldn't have.

Or a lot of standard features that economists

tend to think are normal such as prepayment penalties. It's pretty well known in the

real estate finance literature that you can get a lower interest rate if you take a

prepayment penalty because it allows the financial institutions to price

prepayment risk. Well a lot of consumer advocates absolutely hate prepayment

penalties think that they are the worst things in the world,

despite they actually being quite common

in every other national mortgage market, except Americas.

There are other things, too, such as having know having recourse for instance people point to Canada

as not having had much of a housing crisis whereas in Canada they will garnish your wages if you don't pay

your mortgage we would never think of such a thing in America of actually

...