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April 7, 2014



I’m mad as hell

Just about everywhere you turn, you see articles and commentary about the government actions to stem the fall out from the subprime mortgage crisis. I’ve resisted writing about this until now, mainly because so many people with at least a passing interest in money, government, or politics have covered every conceivable angle on this crisis. But, reading this post on the Money Blog Network forums, I was just so fired up, I wrote this in response. Be warned, I do start ranting:

My Fellow Americans,

Our financial system is a mess, our elected officials are more worried about getting re-elected than doing the right thing for our financial system, and nobody is taking responsibility for their actions. I am angry (mad as hell, to be more accurate) about the subprime mortgage crisis and the fall out into the rest of our banking system (and beyond).

I am NOT angry at individual homeowners, for the most part; while they certainly should have exercised more caution when running their finances, I have a hard time getting upset with people who took out mortgages their bankers allowed, in many cases encouraged, them to take. While the homeowners aren’t innocent victims in this situation, I can think of so many more deserving targets for scorn:

-School systems that provide inadequate financial and money management teaching, leaving so many potential homeowners undereducated about the risks of mortgages and reliant on the (sometimes unscrupulous) advice of bankers.

-The aforementioned bankers, for giving people loans they couldn’t afford by any reasonable measure, under the assumption that home prices would keep shooting up, and telling the mortgagees they could easily do a cash out refinance in a few years.

-The huge market for mortgages that allowed the banks to move the subprime mortgages off their books, enabling them to make MORE questionable loans with virtually no (perceived) risk to the banks themselves.

-Investment banks that bought up and packaged dozens, if not hundreds, of subprime mortgages, pretending that if they sliced and diced enough questionable loans, they’d end up with high quality products with virtually no risk.

-Ratings agencies, which played along with the charade and gave high ratings to the mortgage backed bonds, regardless of which mortgages were backing them, leading to the spread of mortgage-backed securities throughout the national and international financial system.

-A federal government that, through a mixture of deregulation, perverse incentives and implicit (and now explicit) promises of government protection, allowed a massive bubble to form in the housing market, and did nothing to limit the fallout until it was too late.

-At least a quarter century of government policy makers who, when given the choice between cutting spending or raising taxes to bring the federal budget in line, have opted for (c) adding to the deficit and pushing the politically tough but fiscally possible decisions off onto our children. We face massive entitlement deficits and looming shortfalls and yet, neither Democrats nor Republicans are willing to tell the American people that there have to be cuts in federal spending, higher taxes, or both, and SOON, or our children are going to spend most of their lives simply repaying the debt that accumulates.

Next time you feel like hurling blame at homeowners who took out loans much larger than they could handle and now need to be saved from foreclosure, remember all the ‘helpers’ they had in getting to that point, and direct your scorn accordingly.

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