Saturday, October 04, 2008

What politicians won't say about the Mortgage Meltdown

What the politicians won’t say to you about the mortgage meltdown is simply that it’s your fault. Plain and simple, it was your fault, but they can’t say it because you not only don’t want to hear the truth, you want to be appeased not to mention that whenever a politician (normally mistakenly) tells them the God’s honest truth (after he’s roasted in the MSM) you turf him out of office.

Let’s look at this mess and go back to the beginning…which for me is found in the late 90’s when the Democrats came up with the idea of helping poor visible minorities move to the middle class by making it easier to buy a home. The idea being that the white middle class was developed in the late 40’s or early 50’s when people began to buy a home as their bedrock investment which has ensured that when these folks die their children who are also in their own homes can pay them off and pass along the profits to their kids and so on and so on. Seemed like a good idea on the surface but what began as a responsible program demanding 10% down with sufficient proof of employment and an appropriate formula that lets you know what size of mortgage you can safely handle quickly began to drop off the safeguards, the down payment dropped from 10 to 5 to 0%, then came sub-prime rates and finally interest only payments.

Now I’ll conceded that the sales people that were selling these mortgages played into the greed of the people buying them by ignoring their real economic situation and provided them with larger mortgages than was responsible to do so, but why were these people looking at 2500 sq foot homes at $400,000 when their personal situation clearly showed a starter home was appropriate and that’s where we really got off track. Up until the late 80’s people seemed to understand that you started out with a small home, a used car (just one per family) and unless you got your furniture as a wedding gift you only bought what you could afford, but then came the large furniture box stores saying don’t pay a cent for a year and people loaded up with the best of everything.

So what really happened? Why is this a crisis, because people got greedy and tried to hit a home run with a nice house, 2 cars and the best electronics and furniture while putting all the costs off and ignoring the idea of putting a little aside each month so when the time came they pay off the majority of the expenses. The doubled down on the housing market maintaining the greatest growth rate in history and were shocked when the bubble popped as ever other bubble has popped in market history.

Politicians need to get out of the way and stop using the private sector to play their social engineering games (read Congressman Barney Frank). The reason so many white middle class families came out of the 40’s is because they used the GI bill effectively and worked their way up. It wasn’t a hand out, they fought and they were rewarded.

Today’s generation wants the big handout without doing the heavy lifting and the democrats looking for votes played them with false promises. I have no problem with helping visible minorities get a leg up and own a home thus helping them move their families slowly up the economic ladder but it has to be within a proper framework. A minimum of 10% down, the rest insured by a government agency (you pay a premium folded into the mortgage payment) and a formula that ensures people only get a mortgage based on what they can pay back. It does no good to provide the illusion to people that the market can save them if they can’t make their payments it does no good to trick them into believing they can have a Cadillac when a Chevy will do. It’s time to demand that people become accountable again. Stop blaming the politicians for your ills and start taking responsibility for you. They can’t fix what you broke nor can they honestly talk about it if they believe they’ll get fired for telling the truth.

More regulation is not the answer, more personal responsibility is.

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