View Full Version : Banking - Georgia and Texas compared

David G
04-13-2010, 12:22 PM

Yet Texas has managed to avoid severe stress to either its housing market or its banking system, while Georgia is suffering severe post-bubble trauma.

So what’s the matter with Georgia? As I said, banks went wild, in a scene strongly reminiscent of the savings-and-loan excesses of the 1980s. High-flying bank executives aggressively expanded lending — and paid themselves lavishly — while relying heavily on “hot money” raised from outside investors rather than on their own depositors.

It was fun while it lasted. Then the music stopped.

Why didn’t the same thing happen in Texas? The most likely answer, surprisingly, is that Texas had strong consumer-protection regulation. In particular, Texas law made it difficult for homeowners to treat their homes as piggybanks, extracting cash by increasing the size of their mortgages. Georgia lacked any similar protections (and the Bush administration blocked the state’s efforts to restrict subprime lending directly). And Georgia suffered from the difference.

04-13-2010, 04:47 PM

The People's Party (http://en.wikipedia.org/wiki/Populist_Party_(United_States)) was founded up the road a piece in Lampasas, TX.

Part of their legacy was a very strict anti-banker stance in legislation enacted in the wake of the Great Depression.

Until 1998(?) you could not legally borrow or lend against home equity in Texas.