Subprime Loans NOT the Problen. Who Cares? NOT Your Government!
After the worldwide recession hit, and economies everywhere fell flat; after we (the U.S. Government) created the TARP & Stimulus “rescues” and set the stage for tomorrow’s bankruptcy; after we “bailed out” all those sinking banks and finance firms; after we villainized CEOs and big-time finance people and sent thugs to threaten and disgrace them even at home; after we essentially took over banks and AIG and our finance sector; after we punished and outlawed whomever we thought guilty of the “subprime fiasco”; after we reset the regulations to outlaw subprime loans (as best we could) and instead turned to low downs and low interest rates and government subsidies and tax credits and (anything else we might imagine) to help houses be bought on the cheap so poor folk can have them too; after all that, after 6 months of “gotta do it now” government intervention in our economy and trillions of debt for our children tomorrow … after everything else … someone has finally thought to analyse the facts, to see just what did happen in the great housing and economic meltdown we are still watching melt before our very eyes.
The analysis was just written up in the Wall Street Journal on July 3. Stan Liebowitz, professor of economics at the University of Texas, looked at the facts and figures in a database of some 30 million mortgages. What he found is almost laughable, were it not so tragic … and devastating to the actions and promises of our government. The subprime loans, declared the source of all the evil in the world’s economic fall, had little to nothing to do with it! They were a negligable factor in most mortgage forclosures. Instead, the problem in the majority of cases was exactly the so-called cure that the government is now turning to to refill empty houses and renew the promises that even poor folks can own their own dreamhouse: the low or no down payment loans! Simply continuing to get houses into the hands of folks who have little or no material equity in life by setting up mortgages on little or no financial equity in the house!
Liebowitz, in “New Evidence on the Foreclosure Crisis“ pretty well tells it in the subtitle of his article: “Zero money down, not subprime loans, led to the mortgage meltdown”. A rather obvious fact shows up in the analysis, obvious enough that most of us hardly needed a professor, or any so-called expertt tell us. If someone bought their house for essentially nothing, and were paying for it much like they’d otherwise pay rent, they have little compunction at walking away (just as any landlord can tell you) in the middle of the night if times get tough, or there’s a need (say, a new job, or divorce, or sick parent in another town) to move on. They’ve nothing, really, to lose. It is pretty much a “well, it was cool while it lasted” season in life. Gotta go now.
Even in the most sincere of intentions, the only way new home buyers will stick around and really try to make things work, is if they have an investment (that’s why landlords get the biggest deposit they can, upfront) they don’t want to lose. And the only way most of our government programs will work is if housing prices get back “on the bubble”, start rising up fast enought to create at least a paper equity that stressed home buyers might hate to lose. Ah yes, once again the government solution is a hope for “more of the same”! Change you can believe in. You do, don’t you?
