In his morning op-ed, New York Times economist Paul Krugman turns his Noble prize-winning, piercing brown eyes to Georgia’s growing army of failed banks and wonders “What’s wrong with Georgia?”

I’m not sure how many people know that Georgia leads the nation in bank failures, accounting for 37 of the 206 banks seized by the Federal Deposit Insurance Corporation since the beginning of 2008. These bank failures are a symptom of deeper problems: arguably, no other state has suffered as badly from banks gone wild.

To appreciate Georgia’s specialness, you need to realize that the housing bubble was a geographically uneven affair. Basically, prices rose sharply only where zoning restrictions and other factors limited the construction of new houses. In the rest of the country — what I once dubbed Flatland — permissive zoning and abundant land make it easy to increase the housing supply, a situation that prevented big price increases and therefore prevented a serious bubble.

What makes Georgia so special?  According to Krugman, it basically boils down to a lack of consumer protections, which allowed “homeowners to treat their homes as piggybanks, extracting cash by increasing the size of their mortgages.”  Texas, with its similarly sized, limitless growth, mega-opolises, has such protections in place and isn’t feeling quite the level of bank-failing pain as the Peach State.

Krugman’s Monday morning lesson?  While all the focus in the national press has been on breaking down the country’s largest banks, good old-fashioned predatory lending was also a major contributor to the greatest of recessions.

Thanks to Judy for pointing out the Op-Ed!