So I have not been good about posting. Past couple of weeks have been hell and I just realized that I hate the clicky noise this god damn keyboard makes whenever I hit the god damn space bar key. Though it is an ergonomic keyboard and I must say it is very comfortable... Yet I digress.
Here is some food for thought. Did you know that last week the United States basically socialized its entire banking system. That's right folks... Marx and Stalin are laughing their asses off right now because by bailing out the banks that failed the government is taking on all of their bad assets... thus removing the banks from the risks of bad mortgages... thus if our government owns all the bad debt... and banks own all the good debt... back in the ole country that equals socialism.
Q: But Joey, what about all those bad mortgages?
A: People with bad mortgages are stupid fucktards who deserve to have their asses kicked. There is plenty of blame to go around but come on people, if you make 45,000 a year and you want to buy a house for $120,000... there is no way that you are ever going to be able to afford to make your payments, and your taxes, and eat... all at the same time... oh and forget about upkeep and maintenance...
Q: But weren't they misled?
A: Only because they wanted to be misled. Banks, realtors (most of whom have a special place reserved in the 9th level of hell), home sellers, and buyers were giddy over ARM (adjustable rate mortgages) and flush with a seemingly never ending cash flow. Having an ARM was likened to leasing a vehicle... it allowed you to purchase caviar for the price of beer... and similiarly people weren't going to keep their homes any more than they'd keep a lease vehicle. People would buy their homes, renovate, sell it before the ARM kicked into a higher interest rate and walk away with more cash in their pockets than they started with. It was a win-win-win for everyone involved. For banks their was an endless stream of people who qualified for ARM's, for realtor's there was a never ending flow of houses on the markets, for home sellers there was a never ending supply of buyers, and buyers were deluded into thinking that the American dream could be had.
Q: You are an asshole and you are making light of people's hardships...why?
A: I'm not making light of anyone's hardship. People who are losing their homes and are caught in upside down mortgages are pitiful; however, it is a problem of thier own making. They allowed their realtor who is a supposed professional to show them houses that were in their price range... of course you start out at 50 grand. Your realtor shows you the single wide 1972 flood trailer sitting perilously on the side of a hill with the wheels still under it. They convince you that this is what you can expect in your price range. If you insist on seeing more houses they will show you every peice of shit they can find until you agree to look at that nice 90 grand home in neighborhood that actually has a lawn and indoor plumbing. At that point you're at the end of your rope emotionally and are making decisions purely on instinct rather than good sense. They convince you that you can afford it if you save, avoid unnecessary expenses (such as hygeine), and grow your own food. Any reputable bank will try to help you out. Good banks steer people away from ARM's and towards first time homeowner loans. ARM's are ok as long as you know what your getting into. Unfortunately people simply allowed themselves to be taken for a ride.
Q: What happened??? How did it all go so wrong???
A: Well let's start with my personal favorite ideal... the ideal that markets want to be free and that supply and demand should dictate price. This is a very capitalist ideal, and just like anything else a free market needs to be totally free to dictate its own terms... that includes silly things like government oversight and regulation.
I hate socialism. I am not a socialist or communist... I am however a realist and I know that the more you deregulate a market, the more opportunity there is for people who are in positions of power to abuse and manipulate that market.
The idea that markets simply ebb and flow according to supply and demand is completely stupid. Completely and totally stupid.
Lets look at our friends at the bank shall we. So we deregulate the banking system... thus allowing them to be free... free to allow the market to dictate the price of their stock, the amount of money they to invest in loans, and the amount of money they have on hand to bet on risky ventures that have the potential for high return. So they do... and as long as the market hums along with high employment, high consumer confidence, and unrestrained spending everything is fine. In fact in good times the CEO's of these banks look like geniuses and lauded for their insightfulness and capacity to bet on a hot market.
The problems really started in the housing bubble that occured sometime in 2002. It was during this time that pundits and sensible people started questioning the value of homes in some markets. Apparently no one noticed the remarkably high amount of ARM and other high risk assetts some banks had on hand. Of course its not like they had to disclose such things what with deregulation and free markets... they could cover it up as long as though high risk ventures didn't begin to default at an alarming rate.
Banks thought they were safe betting on bad mortgages because historically people have been willing to sell thier souls before they would let their homes go; however, they apparently misjudged the psychological effect that masses of people losing their homes would have on the populace as a whole... nor did they realize just how badly people were struggling with maintaining their middle class life styles.
I read an article about 6 months ago, and it was a fairly inocuous article on MSN Money about how some people were forgoing paying on their mortgages in order to keep up with their credit cards. The reason being that people were using the credit cards as part of their cash flow and using them to pay for essentials such as rent and utilities. The article continued on to admonish such people for using their credit cards so foolishly and how running up high debt on your card was a major financial faux pas. It missed the bigger picture... credit cards? Instead of mortgage? What the fuck? Is that possible? How desperate must people be? This is a trend of desperation not impulse buying... it demonstrates a massive paradigm shift in the way people are thinking about their homes, their credit, their lives... holy shit... I knew then we were fucked.
The real nail in the coffin came with the spike in gas prices, consumables, groceries, a melt down in the domestic automotive industry, which sent ripples through the financial sector. As people starting losing confidence in the value of the dollar and began saving more instead of spending it sent the consumables market into a tail spin. Companies that couldn't hack it folded up and sent workers to the unemployment line. As more people lost their jobs and their source of income... defaults started to increase... as defaults started to increase banks ran out of buyers because they suddenly had massive quanities of product (sellable homes) on their hands and not enough buyers. These bad loans caused banks to freak out and suddenly they did not want to loan money to each other anymore. If banks don't loan money to each other it reduces the amount of credit available to the consumer. Soooo... unless you have a perfect credit score you can't get credit, since no one has a perfect credit score no one can get credit, so no one can make major purchases like houses or cars, if you can't get a loan to buy a car then the car maker can't make money, and you wind up in a vicious cycle of people needing credit and not being able to get credit.
So the market is dictating terms right now, but not the terms that people who work in the financial industry want... so they want bailed out of their stupidy and greed... and really that's what were talking about here... banks who made loans to people who knew they were never going to be able to pay them back, realtors who went out of their way to ensure their commission was fat and healthy, mortgage brokers who orchestrated these exotic loan deals in what I'm sure will wind up being a criminally negligent set of class action lawsuits, and stupid, uneducated, uninformed, and impulsive consumers who chose to look the other way or convince themselves that they could afford a house payment that basically took an entire paycheck.
K... I'm done bitching now. L8R
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