More Problems with "Free Markets"

Two words: collective action.

Sometimes, it makes economic sense, even when a cartel is not implied.

Check out the Atlanta Mortgage Consortium, that helps banks avoid "excess" foreclosure costs while simultaneously helping them to spread the risk of continuing to lend. The consortium buys up the property at a "market price", one that may even keep the lender whole compared to a foreclosure/liquidation price. The property is then re-mortgaged, to the same or to a new lender, but the loan risk is shared among the consortium of banks.

Basically, they act like a clearing house for lender foreclosures.

What incentive do banks have to participate? Says one with first-hand experience:

Leadership, lender cooperation — not competition — can get us through this crisis. This is a challenge for the financial community and American families caught in "interest only" and high-interest loans. It is not the problem for all taxpayers.

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