Don’t forget what and who really caused this recession?
It seems clear that the fundamental underlying cause of the current recession was the housing bubble which developed over a couple of decades and then suddenly began to collapse at the end of 2007.
This bubble developed when policy changes implemented by Fannie Mae and Freddie Mac greatly enhanced access to home loans to help lower income folks buy properties that most could not really afford. These policies also drastically eased loan restrictions for almost anyone else wanting to purchase real estate and led to an incredible upsurge in demand for homes and other types of real estate.
The resulting growth in demand and prices (and potential profits) then encouraged rampant speculation by huge numbers of individual and commercial investors who could also easily borrow money at low interest rates with very limited or no down payments and then quickly “flip” ownership to some other investor who often would then do the same thing….over and over again?
This then resulted in the building industry constructing homes, condos, strip-malls, etc. as quickly as possible to take advantage of this phony explosive growth in demand and the resulting expansion of prices. I say phony because much of this overall demand was not driven by buyers who planned on occupying or using the property they were buying…it was mostly by speculative investors who were highly leveraged. When the number of potential buyers started to dwindle, as it eventually had to, the entire market collapsed as panicked sellers started to bail out. Many if not most individuals and other entities were left holding the bag!
To make matters worse, our federal regulators allowed investment bankers to “bundle” the highly leveraged and extremely risky mortgages used to fund all of this into what are called derivatives and sell them as safe investment opportunities (Mortgage Backed Securities) to investment institutions throughout the world).
And then to top it all off…talk about the perfect storm…the insurance industry got involved and sold insurance policies that protected the final investors in these derivatives from loss.
Of course the bubble burst, and we the taxpayers were forced to spend unspeakable sums of money that we don’t have to bail out the financial institutions and insurance companies, and to help cushion the fall for many of our fellow citizens who ended up without jobs, homes, or health insurance.
The damage to the world’s economy and our country is just incredible. Our unemployment rate is still around 10%. This leaves millions unemployed and millions of properties are or will be in foreclosure.
What about the huge numbers of folks who bought homes or other property during this greed and speculation fueled firestorm of ever increasing prices with the intention of living in or using the property for legitimate purposes? Many now owe significantly more on the property than it is worth…or in mortgage industry lingo…they are underwater. Should these folks opt to stay in their ownership position just because they can still afford their payments? Are they morally wrong if they simply choose to walk away from their property…as many are doing? Their overall credit will take a severe hit, but many have chosen to do this and just rent a place to live during the seven years required to build up their credit again instead of continuing to pay for property that may never return to its original cost. Aren’t these folks also the victims of our lack of effective leadership at the federal level that resulted in these property’s values expanding and then collapsing?
What about the millions of mostly poor, financially naïve families who were told by the “experts” that they could afford to buy homes even when they clearly had no means to make their payments when the low front-end teaser payments went to full market value?
There is plenty of blame to go around. You certainly have heard our political leaders blame the bankers and the insurance industry, and even investor’s and buyer’s for their greed and stupidity. What you won’t hear is these same leaders accepting any responsibility for the lack of effective political and regulatory leadership in Washington
We have such a wonderful country…why are we allowing these largely self-serving politicians’s to continue to stay in office through the power of incumbency?
These elected officials are supposed to serve the best interests of “we the people”. Instead they seem to be mostly interested in doing whatever it takes for their political parties and themselves to stay in power. That requires money which primarily is coming from rich and powerful lobbies. What do you suppose the lobbies want in return? Clearly they intend to influence the lawmakers and regulators to allow the industries and organizations behind these lobbies to operate in ways that maximizes their wealth and power.
In my opinion, this is not a political party issue…both parties share the blame. This is a systemic problem. Our elected leaders seem to have forgotten that they are supposed to be totally dedicated to serving the greater good of our citizens. We only have one reasonable power at our disposal…our vote and we better start exercising it wisely.
Please visit:
Citizens Against Politics As Usual
http://capau.org
Lee's Political Opinion
http://leespoliticalopinion.blogspot.com
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