I’m no financial expert, no economist and no soothsayer, but I can read and read and read (as can you I suspect).
I read in the papers about the horrible things banks did to create the financial meltdown, I hear the condemning rhetoric from politicians, I read the horror stories about those individuals losing their homes. I say to myself, what happened, who is really at fault here? It’s very clear that banks and mortgage companies took advantage of the buying spree in houses and that they took irresponsible risks. To meet ever-growing demand for mortgage-backed investments they encouraged irresponsible behavior within their own organizations and among the home buying public. But all this is a symptom of the problem.
Individuals too are responsible. They are responsible by flipping houses and speculating, by leveraging their homes through irresponsible home equity borrowing and most of all by buying what they could never afford in good times or bad. But this too is not the real problem.
The real problem in this crisis is the politicians. Politicians passed laws, encouraged regulations and pressured institutions to provide subprime mortgages to more and more people. Helping lower-income people get ahead I think they call it. Progressive politicians saw a growing gap between the haves and have-nots, their solution was to promote home ownership for the have-nots as if that is a solution to income disparity. Fairness is a worthy concept, but it needs a basis in reality as well.
Politicians, especially “progressive” politicians, somehow concluded that home ownership was right up there with life, liberty and the pursuit of happiness. Their point of view is like the poor person whose quest is to own a Cadillac only to buy one, be unable to maintain it and have it repossessed. In reality the true quest is achieving the ability to afford the car regardless if it is ever purchased.
When the crisis hit politicians were quick to target the blame in another direction and continue to do so. Instead of hearings grilling bank CEOs, we need hearings grilling members of Congress on their actions over the past several years that directly affected the behavior of government agencies, banks and individuals. There is much government can and should do, but manipulating human behavior is not one of them.
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Did you ever hear about George W. Bush and the ownership society? That we don’t need to worry about the rich buying up other companies and getting richer (and getting tax breaks) because we can all buy houses and they will go up forever? Or buy shares in 401Ks instead of pensions, because stocks will go up forever, when they actually have big shocks when deregulation allows bubbles to grow huge and pop. Leaving these panicked rubes to sell out at the bottom to the boys with deep pockets, but now they have no pensions. One company buys another, lays off the workers, keeps the customers and either replaces capacity overseas or tells the remaining workers to work harder: lucky to have a job. That is how the rich hollow out the middle class and eat the poor, dude. It wasn’t progressives pushing subprime loans to ghetto flippers, it was banks making loans with no standards because they didn’t hold them, they sliced them into mortgage backed securities (deregulated) and sold those to suckers, took commissions and looked for riskier new loans to make, rinse and repeat. Bonuses for all salesmen and CEOs, until the crash. Then buy the government and print get out of jail free cards.
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Sorry, but the facts don’t support your conclusions. Barney Frank, etc and HUD pushed the sub prime loans, the banks took advantage of the madness, but the idea that everyone should have a house was political.
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