Subprime Virtues: The Moral Dimensions of American Housing and Mortgage Policy

Abstract

The so-called “subprime mortgage crisis” has led to intense scrutiny of American housing policy, mortgage finance, and even the goods of homeownership. Some critics allege that the housing bubble and ensuing financial crisis were consequences of misguided state intervention, while others contend that the sources of the crisis lay in the pathologies of unregulated markets. Both sides, however, treat the crisis and its underlying causes primarily through an economic lens of cost-benefit analysis. Building on the insights of contemporary political theorists and the new institutionalism in political science, we consider American housing policy from the vantage of virtue theory. Not only is housing and mortgage policy inevitably normative, but public policy can be an important tool in fostering what we call the “subprime virtues” of truth-telling, promise-keeping, frugality, moderation, commitment, foresight, and judgment that are absolute prerequisites for any decent society.