Reader Input: Economic Crisis
Houston Don Weighs In
There have been a handful of political posts on the site in the last two weeks. Most of you have written in that you enjoy these or that you ignore them. A couple of you are upset by them. Please bear with us. The election is almost over. And those of you who want to voice another option, don’t forget that the door is open. Don wrote this and with his permission I am going to post it. If you disagree, write your own and I’ll post that too. And YES, there will be a number of porn news posts this week as well. Plenty of that as well.
Don Houston of www.XCritic.com writes.
Hi Roger!
I usually don’t get involved with online political discussion but your website posting drew me in. Regardless of which political party a voter favors (if any), there are certain factors at play here that both of the major parties contributed to (and the smaller, wannabe political parties would have done nothing to help about).
The stock market has taken incredible hits of late, guys like me losing more money in the market via mutual funds/retirement savings than we care to admit. The populist crowd lay that blame at the feet of President Bush and the GOP for all sorts of unproven allegations and misconduct while they seem unwilling to just address the matters in a manner easy enough for the general public (that can’t even balance a freaking checkbook) to understand.
A major reason why the stock market took a plunge was related to the Freddie Mac and Fannie Mae organizations that most people know little about. Both were established to increase the availability of money to those people buying houses, allowing banks to bundle up mortgages and sell them off as financial assets so investors would deal with lowered risk and banks would have more money to loan out. Certain restrictions have always applied to said loans, many of which people found out about as they applied for their home loans.
One of the changes in society during the 1990’s was the governmental promise of getting more people into houses as home owners. The idea has long been that subsidized housing leads to crime and the tenants tend to regard their dwellings as a “right” to abuse but not keep up with regular maintenance. Ownership increases the personal “stake” in a community so getting more people in homes they own makes sense on one level. A quick look at almost any government housing project in the country will su pport my claims. So, rather than warehouse people as had been done in the past, HUD (under Clinton) made extensive attempts to increase home ownership by those that traditionally had as much chance buying a house as you and I have making POV sex tapes with Aurora Snow. Whatever your beliefs in socialism might be, a large number of people do not have the first clue about the true costs of owning a house, nor its upkeep, and are ill prepared to venture into the life changing event of buying a home.
So, when looked at historically, the numbers of people buying a home as a percentage have increased slightly, but not enough for the social engineers in government that figure getting more people into a home would translate into a panacea of good times (lower crime, more productivity, etc). To this end, the federal government was complicit in changing the way mortgages were drawn up, encouraging lenders to loan out as much as possible to folks, even winking when numbers were fudged or equations were altered to allow someone to slip past traditional gatekeepers such as percent of income needed for a loan, increasing the interest rate to compensate for the elevated risk. Sadly, the principle of conservative banking was dropped in favor of “loan at all costs”, promoted by the federal government to the point where annecdotal evidence suggests larger institutions were even threatened with prosecution for redlining (not loaning to poor people based on geography) if they did not comply.
As these “sub-prime” loans were handed out all over the place, particularly in states with major housing shortages, it increased the costs of housing for everyone since more people buying a house means fewer houses on the market. A piece of shit home in many parts of California costing $400,000 compared to a l arger and better home in Houston costing closer to $100,000; incomes not elevated enough to cover the difference. To the lenders, they got the reassurances by the government and psuedo government organizations like Fannie and Freddie that they would be covered, reaping their biggest profits at closing time instead of needing to assemble a rock solid portfolio of housing at market rates. Such loans carried a premium in interest rates as well as additional hidden costs, the worst of which tended to be an adjustable rate that many did not think would ever impact them.
As with any gravy train, it takes years for that kind of thing to be an issue, long after those responsible are no longer in power (or long after they have divested their financial interests into safer investments). Every time the interest rate went up, it became harder for those stupid enough to buy into the “I can own a home too” or “my increasing equity will save me” scams, the domino principle resulting in jobs lost and credit crunches impacting all of us. There are no easy answers, especially not easy answers that many people will find acceptable but to suggest this should be laid at the feet of the current President as even a major player of the problem is to disregard the facts completely. He has enough to answer for without this too, but ultimately, everyone that signed for a loan they were unable to continue paying (and those that lent them the money) were far more responsible.
When I bought my own home several years back, my credit scores were high enough that I qualified for an adjustable rate under 3% as the initial rate, then it would adjust higher after a few years. My mortgage broker and realtor tried to get me looking at houses that would be palatial for the area too (since I could “afford it”) but I re sisted, demanding a fixed rate/15 year note with the intentions of paying it off sooner. I saved for years to make the down payment despite the offers of an 80/20 split or other creative financing too, knowing how markets turn and wanting housing I needed over what I could possibly afford during good times (not bad for a high school drop out, yes?). To all those in Southern California (and elsewhere), those programs that made loans easier to get impacted you back then too; resulting in the costs of your houses going far beyond what they should have been and what you had to pay so now you (and the rest of us) will end up paying repeatedly for the social experiment gone awry.
Much of the fault lies in the hands of Congress, both political parties of Congress, but when all is said and done, those that took the loans were the ones that should have read the fine print and refused to buy more than they could afford. Thanks to them, the world economy has lost trillions of dollars, yen, francs, Euros, and other forms of currency in value.
Sorry for the long winded rant but as a fiscally conservative member of society that lost way too much equity of late due to idiots from all walks of life acting as if they existed in a protected bubble, I felt compelled to reply. No matter who wins the election, Bush will be gone but the economic troubles will be dealt with for a generation or more and suggesting he was the driving force that caused the collapse as it seems popular in Porn Valley to do these days, is simply lame. I know you “get it” more than most but the constant blaming by so many is just as likely to lead to a disaster should a certain candidate get elected next month, one we can’t afford (unless we’re dirt poor with nothing to lose).
Take care, Don
