Bad loans, bad borrowers, bad math and condoms for bananas.
-- editors note: this editorial originated (good mortgage term) when housing and mortgage crisis first surfaced a few months ago. In light of Bear failure, it is again timely.
IF liberal policy decisions force the mortgage industry to accept lower income and minority applicants that are not credit worthy, THEN liberal politicians should not start blaming the “greedy mortgage brokers” for the inevitble crash when all of these un worthy mortgage owners start defaulting.
But that is exactly what is going on. Politicians, mostly liberal, are quick to jump on the bandwagon of blaming the lenders for the problems in the mortgage…and by extension….the housing industry. Countrywide Lending’s Anthony Mozillo is becoming the next Ken Lay figure….being blamed for getting rich while destroying the mortgage business. Truth is, Mozillo has spent way too much time in a tanning booth to have done this all by himself….but he did make a lot of money and he did build Countrywide into a huge business largely on the wave of easy credit, tiny down payment loans made to customers that the local S and L would not even think about entertaining. That includes even shady S and L's donating money to John "Keating 5" McCain.
So for that, Mozillo is certainly complicit….but the truth is, all he is guilty of is taking foolish government policy and following it better than his competitors and therefore accumulating more of the risky borrowers than any other company…and thus making more loans and more money in this industry than anyone else.
But it was foolish govermnent policy at the root of this. And really more than just foolish. It was social engineering by the liberals…..and that lovely group that esteemed economics professor Walter Williams calls “the klan with a tan.” (Williams, by the way, is even more tan than Mozillo.)
The normal tan klan suspects….led by Jesse Jackson….took dead aim at lending practices in the 1990’s with his typical shake down modus operandi. Apparently it was “discrimmination” and “racist” to turn borrowers down because of the bothersome little detail like them being unworthy of the credit…and Jesse did not want these folks turned down anymore. With Bill Clinton in the White House, Democrats in charge of congress and Henry Cisneros serving as part time Housing Secretary to fill the dead time between sexcapades (his, not Clintons)….the power rested with the anti-business left.
Thus all kinds of unsustainable financing hit the market. Unsustainable might be characterized as “creative” by many. But it was literally unsustainable….(for those of you educated in government schools…that means it won’t last ). And in 2007….it stopped sustaining….and them chickens came home to roost. This is the sour fruit of the perfect laws of supply and demand being perverted at the base by foolish and interventionist government.
The supply of mortgage money was artificially increased exponentially by political pressures to give loans to just about anyone who could prove they had lived in the same shopping cart for more than 25 minutes. Home mortgages became as easy to get as pay day advance loans. And we think many might have been the same customers, too.
IF the supply of home loan money increases dramatically, THEN you can expect the demand for homes to increase and with it, the price of homes to increase.
And boy did they. There was absoutely a boom in housing, housing prices, the building trades and all related industries to real estate. And all of this was fabulous for the economy. Lots of people made lots of money building houses, selling land, selling mortgages, selling housing materials, landscaping homes….not to mention other people selling trucks, low fat yogurt, health club memberships, sushi and insurance to all of those who did. (for those of you educated in government schools, that is how capitalism WORKS)
And when an uncreditworthy customer got in trouble with their mortage, there was no real problem since it was likely that the percieved value of their home had gone up dramatically since they bought it. You know…they buy a house for 175 thousand that they cannot afford…a couple years later they are having trouble making payments….but since the market value of that house had gone up to say, 300 thousand, then the borrowers can either sell to the next unworthy borrower and get out…or worse…go get a DiTech second mortgage for 100 thousand in cash…and thus only delay their problem. (because….they are STILL uncredit worthy….they just now owe 100K more. What is it DiTec says….”Consumers are Smart.” Maybe not so much…)
IF there is plenty of information available that warns of the fallacy of these loans, THEN it is the fault of the consumer for accepting them.
And there is plenty of information. There is the Dave Ramsey radio show, the best of the many get out of debt related shows. There is basic math knowledge. There is common sense.
But then there is the reality that most Americans don’t access any of the above. What they accessed was a government school system that didn’t teach ANY solid math and certainly no common sense. They did teach phony self esteem, advanced victimhood and how to put a condom on a banana. And armed with that worthless knowledge, America got screwed on this one….and even Jocelyn Elders wouldn’t call this safe sex. (Anyone up for a little casual fisting?)
IF your dilemna is self inflicted, THEN it is your fault.
But of course Jesse Jackson and Al Sharpton do not want to hear that. Neither does Hillary Clinton or Barrack Obama or John Edwards. Sheesh…even John McCain and Mike Huckabee don’t want to hear it. Instead they all like hearing…or saying…that this was a case of greedy unscrupulous lenders praying on poor downtrodden Americans. Now just what the hell was going on here? You would think bandits were out on the streets forcing consumers to take money at gunpoint. Right. This is akin to accusing a woman of raping a man. (then again, this did happen recently to some poor little weaklings on scholarship to play football at North Carolina. I’m thinking that in either case, you ain’t in those handcuffs without some consent on your part.)
Now we know all of these scenarios are ridiculous. I mean, only Duke football players could legitimately be handcuffed against their will by women. Especially if those women are stirppers from NCCU…but that’s another chapter.
But as ridiculous as it is….the politicians will likely step in and try and correct this problem as if this really were an economic date rape…the fault of the lenders cramming cash mortgages down the throats of unwilling borrowers. What is the dumb little cliché? “What part of no don’t you understand?” Uh, the YES PLEASE is what confused me. (valid in the date rape debate also…but again, another chapter).
Dadburn that logic can be so uncompassionate sometimes…..