The subprime-mortgage imbroglio is just the latest chapter in an age-old concern with the charging of interest, especially to individuals. Medieval Christianity forbade the charging of interest on the ground that it was unnatural for money to increase (as by lending $100 at a 10 percent interest rate so that at the end of the year the $100 has grown to $110), because unlike pregnancy there was no mechanism by which an inanimate object such as money could reproduce itself. Behind this superstition lay undoubtedly a hostility to commercial society, which persists today in some quarters of the Muslim world; Islam forbids charging interest although substitutes are tolerated. The concern with lending has persisted into modernity even in Western societies. Usury laws, which set a ceiling on interest rates, and the Truth in Lending Act, which requires detailed disclosure of annualized interest rates in consumer loans, are examples of this concern. The relaxation of usury laws--a natural concomitant of the spread of free-market ideas in American society--allowed lenders to offer loans at very high interest rates to borrowers with poor credit ratings. Payday loans, which charge astronomical interest rates to persons who need money to tide them over till their next paycheck, and subprime mortgage loans sometimes at annual rates 4 or 5 percent higher than mortgage loans to borrowers who have good credit, were consequence of the relaxation. I agree with Becker that credit is no different from any other commodity. For government to place a ceiling on price prevents people from buying the commodity who would be willing to pay a higher price, and thus it prevents a mutually beneficial, and therefore value-maximizing, transaction. The argument for the ceiling is that people who have a poor credit record have demonstrated their incompetence to borrow and so should for their own good be prevented from borrowing more. That is not a compelling argument, apart from any general objections to government paternalism than one may have. A person may have a poor credit record, yet know that he can pay a high interest rate and that he will be better off despite the cost. As Becker notes, although the rate of default on subprime mortgage loans is high, still, the vast majority of those loans are repaid. For many people they are the only route to home ownership, which is greatly valued by the owners but has also been thought (perhaps dubiously) to have social value; that at any rate is the rationale for the tax deductibility of mortgage interest. I do think that there is reason to think that the subprime mortgage market is imperfect, though not reason enough to warrant government interference with that market. The subprime mortgage lenders have engaged in aggressive marketing that may have deflected borrowers from shopping for better terms in the prime market. There are of course many gullible consumers and many people who have difficulty understanding the cumulative costs of high interest. There are also many people who like to speculate or otherwise gamble without a good appreciation of the odds. Perhaps there is even something of a "bubble" aspect to the subprime market. When housing prices were rising, borrowing to buy a house even at a high interest rate (interest rates generally were low until very recently, but high to subprime borrowers) was a leveraged investment, both on the borrowing side and on the lending side. The borrowers expected to repay the high interest out of the rapid appreciation in the value of the house, and the lenders expected to be cushioned against the consequences of a high rate of defaults by those same rising prices: if they had to foreclose, the house would be worth enough more than the mortgage to enable the lender to recoup. A bubble arises not because people fail to perceive that an asset is overvalued, but because they think the perception is not widespread and therefore the asset will maintain or increase its market value. No one wants to sell an asset while its price is still rising, but if enough people think that way the price may rise to a point at which a slight perturbation in the market may cause a crash. Given the riskiness of subprime mortgage loans, a modest decline in housing prices or rise in interest rates (many subprime mortgages were at floating rather than fixed rates) could precipitate enough unexpected defaults to create distress not only among subprime borrowers but also among the lenders. Apparently that is what has happened. Although the result is not a happy one, I do not perceive adequate grounds for government intervention. Proposals for limiting subprime loans have the quality of closing the barn door after the horses have escaped. The subprime "crash" has presumably educated both borrowers and lenders in the riskiness of the market, and if subprime lending persists it will not be because of ignorance of the risk. Of course if subprime lenders have resorted or are resorting to fraud in inducing such loans, they should be punished, but for that no new laws are required.