Paul Krugman points to this clear explanation by Alyssa Katz why Texas has escaped the worst of the housing crisis: tight regulation prohibiting cash-out mortgage refinancing and imposing a strict 80% maximum mortgage.
The reason isnÂ´t a secret Austin cabal of Keynesian technocrats, but history:
The roots of this fierce resistance to debtâ€™s temptations go deep in Texas history. Seven years before the republic joined the union in 1845, a bank panic and resulting foreclosures lost many homesteaders their property. Drawing from Mexican codes protecting landholdersâ€”much beloved by flocks of U.S. debtors who had taken refuge from creditors by relocating to Texas homesteadsâ€”the new constitution of the state of Texas forbade lenders from peddling mortgages to homesteaders.
So regulation is OK as long as itÂ´s based on paternalistic Hispanic codes to protect the landed aristocracy. (I suspect, but canÂ´t prove, a distant origin in the laws of old Castile, when borrowers would have been Old Christians and lenders conversos.) The Salamanca school of theologian-jurists produced an advanced theory of interest – time preference and all – in the 17th century, bypassing the knee-jerk Biblical ban on usury, so Spanish kings and viceroys had access to pretty good policy analysis if they wanted it.
For another counter-intuitive example of enlightened strong-government Texas policy, see the renewable electricity market.
The Texas regulations are presumably constitutional. Nothing stops California or Massachusetts from copying them.