Mortgage Crisis: A Simple Analysis

September 12, 2001 - Recall, if you will, a country, no a world, panicked, not only about terrorism, but about money. We all knew 9-11 would cost a lot. Markets were down, assets destroyed, confidence plummeted. The US government, through the Fed responded by slashing interest rates. Now, I don't pretend to understand global economics well. I only got a "C" in economics because of some crazy bell curve not even my professor seemed to understand. I should have flunked (it was the only class in which I actually slept during a test).
This I do know, however, when interest rates drop, investing goes up. When money is cheaper to borrow, people borrow more.

These low rates coupled with an absurd lack of standards in the lending industry led to the housing boom we saw for several years. We have purchased and re-financed homes several times. Each time, it was clear to us how things really work. Your mortgage broker hires an appraiser, tells the appraiser how much the house needs to be worth, and voila, the appraisal matches that amount. It has been my experience that banks in the past have been far more willing to offer credit than they should have. I know how much of a payment we can afford, yet each time I've met with a loan officer; it is me trying to talk him or her down rather than the other way around.

Why? The banks were making money. Even if a small percentage of folks defaulted, they still made money. But greedy lender failed to see the writing on the wall. This system couldn't go on forever for several reasons. First, people were overextending themselves with home financing they couldn't afford, often using interest only or ARM mortgages. Second, interest rates couldn't stay artificially low forever. Third, the rapid inflation in the housing market was not sustainable. Home prices rose faster than incomes and the bubble had to burst.

OK, all of this is easy to understand. But here's what I find interesting. In the 2004 presidential election, when President Bush had precious little to crow about, someone on his team noticed the housing boom. I recall hearing how under his presidency, home ownership had increased significantly. Suddenly, he was responsible for families, even low income families, realizing part of the American Dream.

Fast forward to 2007. The bottom has now fallen out of the housing market for the above reasons. Now Bush is the first to call on banks and home owners to be personally responsible for their choices. I agree. The lenders were deplorable in their practices and consumers closed their eyes and minds as they signed their lives away for a 3 bedroom rambler with a backyard. But, what complicity does the government or Bush administration have in the current crises?

Are we to believe that no one in the administration knew why home ownership was on the rise? Did these people, some of the smartest in the country, not understand why suddenly even low income families with terrible credit were qualifying for home loans? Nah, I don't buy that.

My bet, were I a betting woman, is more like this. After 9/11, the financial leaders were panicked. Grasping at straws to keep the economy from collapsing, they closed a blind eye to the negligence and fraud of the mortgage industry. They ignored the inevitable outcome for consumers. As the markets swelled, they basked in the temporary glow and touted their "success" to the voters. Then as the unavoidable downturn began, I think they crossed their fingers hoping that the economy had become stable enough in the six years since 9/11 that it could absorb this hit. I think there was also a bit of wishful thinking that maybe, things wouldn't get too awfully bad until 2009, January to be specific. When the problem wouldn't be theirs anymore.

Maybe that's the new American Way. Make a big mess then make sure you leave it for the next guy to clean up.

It's Tough Being the Round 2 Candidate

Hillary Clinton has an uphill battle in the smearing her opponents category. Recently a Clinton staffer criticized and later apologized for criticizing Obama’s past drug use, I think the country went, “Huh?” Didn’t we cover this during the “I didn’t inhale” campaign? A presidential candidate has enough trouble keeping his or her own weaknesses below the surface. Hillary’s problem is His and Hers weaknesses. Despite her protestations, she stood by her man and now has to stand by standing by her man.

What arsenal does she have for attack? Guiliani’s infidelities? No that might look like a vast, left wing conspiracy. Huckabee’s inexperience with foreign policy? He’s exactly as experienced as Bill was in ’92. Ethics? No, she wouldn’t want anyone thinking of a certain colorless water scandal. Mishandling of information? FBI Files. Mishandling of government property? Carting off the antiques in the White House. Frivolous pardons? Anyone remember Marc Rich?

The only thing Hillary has going for her in the smear department is that Ken Starr, the other side and every political reporter in the world has already spent over a decade digging up everything they could on her and her family, and people still like Bill. Hmm, I wonder how much of her appeal is exactly that, people like Bill. With nothing to throw at the other guys, other than the fact that they are guys, the question is, who likes Hill?

Christmas Wars - from December 2006

The Christmas Wars
I got an email from a Christian group I will not name that asked people to boycott stores that are using the term "Happy Holidays" instead of Merry Christmas. I actually read it twice to make sure this wasn’t a joke? No, they even had a survey. "Would you be willing to boycott stores that refuse to include Merry Christmas in their promotions?" No lie. A survey.
Every day I hear of yet another skirmish in this Christmas War on the radio or in the newspaper. Here’s my take on the whole thing, as a Christian, who of course celebrates Christmas.
How many times have we lamented the commercialization of the birth of our Savior? Every year it’s the same discussion I hear about how Christmas has turned into a buying frenzy filled with parties and plays and no time to reflect on the true "meaning of the season." So, hallelujah, we can reclaim Christmas. If stores, airports and schools are saying "Happy Holidays" and eschewing the words that point to Jesus, well praise the Lord.
I am thrilled that Christmas can return to being about the birth of the Redeemer and not redeeming coupons for the latest electronic gadget. Am I offended that a store owners and managers have exercised their rights of free expression to choose the greeting most appealing to the broadest number of consumers? No way! Companies exist to make a buck (or lots of bucks). I can’t figure out why it is that any Christian would be upset that a store has stopped using the name of Christ to line their pockets. I say it’s about time!
So why would this upset people? All I can figure is that having the name of Christ dancing around us in twinkly lights as we shop helps alleviate a little of our consumerist guilt. I happen to believe that asking those who don’t believe in Jesus as a Redeemer (or possibly as a historical presence at all) to celebrate Christmas just because we do is ludicrous. If a non-believing person wants to celebrate winter or Kwanza or just have an occasion to max credit cards and gain 15 pounds, more power to them. To celebrate a Holy occasion with no appreciation for why it’s Holy is meaningless at best and in some ways a mockery of what is True.
So, brothers and sisters, I ask you to join me in laying down the arms in this Christmas War. We love to wear the WWJD jewelry and this is a really good time to actually ask what Jesus might say? Do we really think the God of the Universe is offended because Wal-Mart or the Gap have stopped using the celebration of his birth to make more cash? Let them say Happy Holidays! Please! I for one will have a better Christmas as it becomes more about Christ.

Thoughts on Young Motherhood - 10-24-07

Thoughts on Britney Spears and young motherhood

I just read something online I felt I needed to comment on. Someone wrote that they felt sorry for Britney Spears and all her trouble because she was really too young to be a parent and the pressure was just too great.
WHAT? At 26, years old Britney is older than many mothers raising children with far fewer resources and less support than she has. I think in particular of many of our young military wives, raising children on very limited incomes often far away from their families and some with husbands deployed.
My daughter, Meghan, is 19 years old with a 15-month old son. When she and her boyfriend found out they were expecting, they got married and he joined the military to support his family. They live on less than $2,000 per month (what Britney spends on fake hair in a day). They live 3,000 miles from family, with no nannys or mannys to help at all. For seven months my daughter was alone, while her husband was away at training. During that time, she didn't drink, do drugs or go clubbing at night. In fact, she has never done those things. Someone dare to tell me the pressure she and young moms like her don't face as much pressure as a celebrity!
I am proud of my daughter and proud of the young moms across our country who are faithful to husbands and children despite enormous financial, emotional and physical strain. I feel sorry for Britney Spears that she didn't develop the character to stand strong and withstand temptation for the sake of her family. I mostly feel sorry for her children.
As for my grandson, I don't have to feel sorry for him. He's in the strong, capable loving hands of his young mom.