Thursday, February 5, 2009

Poor People Did Not Cause The Housing Meltdown

Could the righty AM talkers stop scapegoating low-income homeowners for the housing meltdown and the spillover into the banking industry?

This is just today's variant on 1970's welfare-bashing.

The talkers myth-making goes like this: Bill Clinton and Barney Frank decided that lending standards would lessened, and presto! - - shaky, adjustable-rate mortgages were written en masse that came due, defaults ballooned and before you know it, Lehman Brothers disappeared and the markets came crashing down.

The truth is that there was bipartisan support across both the Clinton and George W. Bush presidencies that did make more mortgage money available.

But let's remember that defaults piled up in Florida, Arizona and other retirement and sunbelt destinations.

And in the suburbs, too. A friend in Waukesha recently showed me scores, hundreds, perhaps, of legal notices about foreclosures in areas where houses average around $300,000.

The whole country went on an unsustainable borrowing binge, aided and abetted by banks, savings and loans, mortgage brokers and old-fashioned scam artists.

The really smart men and women bundled these fakey, flakey mortgages, turned them into securities and created even bigger unsustainable markets, trading these so-called instruments, raking in fees at every step.

All this funny business wasn't being stage-managed by people in $75,000 homes in Milwaukee or Detroit or St. Louis.

It was being run by marginally-regulated, self-serving greedy bast*rds, not the poor or lower-income people who for a brief moment became homeowners.

So let's quit bashing the poor. They're still poor. Maybe even more poor.


Anonymous said...

Great reminder to a point that is not brought out enough to get wider recognition.

I doubt that the $75K home-buyers had grand visions of flipping the property in a year for a profit, either.

I am afraid though, if the executive pay caps for publicly backed bank employees is enacted, the mortgages for a lot of second, third or fourth homes for some of these characters will be in foreclosure and further contribute to the economic downturn. ;^)

PS Glad you got to take a day off. 5.6 posts per day through January and all of them relevant and informative is a pace few would dare to follow.

Anonymous said...

". . . Maybe even more poor."

And now homeless, too.

When my (post college-educated) husband and me (college-educated) purchased our first home in 1985 and our second in 1993, we went to the bank, laid out our financials and were told by the bank how much we qualified to borrow, based on our incomes and other debt. We then used that number for defining the parameters of our housing search, i.e. we didn't look at a $300,000 home when we knew we could afford only a $180,000 home.

I can only imagine that poor, less educated people relied on advice from bankers and mortgage brokers in the same way, to tell the buyers how much they qualified to borrow. Except that, fast forward to year 2001, now the brakes are off and the borrowing vehicles are careening down the greedy slope, driven by mortgage brokers and lenders who make more money, the more money they lend.

So even if you accept that some borrowers did borrow more than they could afford, they were directly or implicitly encouraged to do so by someone who should have known better.

BTW: When we closed on our second home loan, we went to the local bank, signed the paperwork and shook hands with the banker whom we knew personally. Since then, I've lost track of how many times our loan has been sold (including once to WA MU.) It's upward of 5 times. Meanwhile, here we are, in the same house since 1993.

Anonymous said...

t on alot of what you say.
Clinton and the Republican Congress deregulated and rewrote laws that set this snowball into motion.
Its the lenders who looks at the individual on a case by case basis and approves or denies the loan.
In this case Fannie , Freddie and the Fedreal home loan banks that said write the morgage and we will back it,,,,dont
Bush gets up infront of Amercia and says everyone is entiled to the dream of home ownership.
The rest is history and GREED. Enough said I could write 20 pages on this with facts to back it all up. But this isnt worth it

Zeus said...

Boo hoo.

Anonymous said...

Is that your unfunny version of "Zeus laughed" ?