The Bubble Bursts

The blame-game is up to full steam now on this mortgage-banking crisis, which depending on who you listen to, has been staring us in the face for up to a decade. Yet history will show that no one would be willing to do anything to try and correct things, despite the growing concern. At least no one who had any power or the authority.

Clinton saw it’s beginnings and did nothing. Bush saw it expanding and did nothing. Senator’s Obama and McCain will no doubt blame each other in the upcoming debates, but where is the legislation with either’s name on it that would have helped defuse the issue?

I submit that this is one of those rare instances of real, bi-partisan cooperation….in doing nothing! It’s roots are in good, old-fashioned American greed, and everyone was on-board.

It started with the typical American consumer who wanted more, but needed and demanded more credit to get it. And now this was applied to the American Dream, our homes. And so in the late, last-century, everyone up and down the food chain found it in their de-regulated interest to “enable” us to realize the dream. Those unfortunates who had never had owned a home, suddenly found that they could. Those that already had one, suddenly realized that they could have bigger and better. So lenders began dumping a whole lot of money into the market and it really began to fuel the prices. It didn’t matter that there was no basis for a “starter home” at $300,000! Somehow, the American family, although shrinking in average size to 2.8 members, needed 40% more room in which to live! The average master-bath now contains as much square feet as two to three bedrooms used to. The average kitchen has become cafeteria-sized, with countertops made of stone. Not just niceties…..we NEED this stuff!

Then came the banking industry’s “no family left behind” lending policies. Why did they adopt this? Because as soon as they could get someone signed up, qualified or not, their loan became a saleable commodity to a larger bank, and then the larger bank could sell it to an even larger bank. Each step of the way gave the seller of the note a little mark-up on the deal. I bet I saw my own mortgage bought and sold 5 or 6 times in as many years. Everyone got a piece. And when you have something saleable and profitable, and I mean anything, then it becomes good business to market it and try to sell more. Works with everything from peanuts to prostitutes.

So where was the government in all of this? Aren’t they supposed to protect us from ourselves? No, not according to good Republicans who want less government influence in our lives and who also love those Wall Street profits. And not according to good Democrats who think that everyone is entitled to a nice, new home despite any ability to pay for it! In fact, within their own mortgage institutions, Freddie Mac was up to his Fannie Mae in backing this high-risk, easy money!

This time there is more than enough blame to go around, and the guilty are everywhere.

The fact is, sometimes in America there is a cause which is so profound that we all share in striving for it at almost any cost. Beating the Germans. Putting a man on the moon. And getting everyone who wants it, three baths and 3000 square feet.