MORTGAGE CRISIS

There is so much blame to go around I don't believe there are too many involved who are not somewhat culpable. The Congress & the President, the Democrats and the Republicans, the lenders and the borrowers all are to blame for this problem.

Every four years we elect a President. He sells us on his vision for the country, how he will lead us on a road to better things. President Clinton believed that if people owned their homes they would better off than people who rent. All in all, a pretty sound thesis. The federal government pressured banks through the FDIC to make loans they normally would not. The current administration followed this same game plan to put even more in homes.

The mortgage brokers made the loans and immediately sold them off to the banks who in turn bundled them together and sent them off to Wall Street who did their manipulation and sold them off to investors in the form of bonds. No one cared what they were doing because each step along the way they made their money.

Through the federal government Fanny Mae and Freddie Mac financed many of the loans. The executives at these institutions made contributions to congressional leaders to keep them off their backs. The executives were paid bonuses for thier performances but they had to "cook the books" to reach their goals. In 2004 the unacceptable accounting practices were pointed out but congress wanted to continue to provide "affordable housing" so they proclaimed the report wrong. In a finance bill Sen. John McCain actually predicted the exact crisis we are experiencing but the Democrats fought any adjustment to business as usual. Now we are in a huge financial mess in this country and Congress is going to try to fix what the federal government helped create.

Mortgage companies were so anxious to make loans that the requirements became minimal. I even heard an advertisment claiming they would use your word for income verification. But even so, people should have an idea of what they can afford. Just because someone is willing to loan money doesn't mean the individual should borrow the money. Americans have become a society that lives for the moment that many people don't care about tomorrow as long as they can live the good life today.

Why should the federal government bail out Wall Street? The answer is, because our struggling economy will come to an abrupt halt if nothing is done. First, if all these homes foreclose the market will be flooded with homes and there will be a huge excess of supply which drive the home values even lower. Since no one will have equity in their homes the banks will not be able to make secured loans and credit will dry up. Second, if all these mortgages are not being paid the banks will be depleted of money and will not be able to make loans to businesses to invest in new capital to grow their businesses or in many cases to run daily operations.

Why did the supposed agreement fail? A couple of reasons, first, every member of the House is up for re-election and must face their constituents and these constituents are overwelming against the plan. So each member is putting their political career on line to fix the mess they helped create. The public is against the bailout because of the name, "bailout". Why should the American taxpayer bail out a bunch of Wall Street big wigs who have made their riches? The second reason I believe is that many congressmen were compromising their ideals in making this deal. Conservatives do not believe the government should meddle in the free enterprise system yet they were willing to vote for the bill for the good of the nation. Then Speaker Pelosi tried to mix politics into the equation and gain some political capital out of the mess and blame all the problems on the republicans which turned the bill into a negative for these "on the fence" conservatives. What was the purpose of her speach other than to stab in the back the ones who were helping her accomplish her goal of passing the bill?

The next question I want to pose is: Why did the democrats want the republicans to help pass this bill? They have enough members to pass a bill without GOP help. I think Speaker Pelosi wanted a scapegoat with the deal. Any fallout from the bill can be blamed on the republicans while the democrats, with the help of the media, can spin any problems on the back of the republicans.

I have always said that any problem the government tries to fix creates another problem. The government wants to help single mothers so they give them money and now it discourages them from getting married and encourages these women to have more children. The government wants more people to own homes and now we are in today's mess. Once again it becomes the responsible having to pay for the irresponsible, if not through our investments we ultimately pay through our taxes.