I was sitting in a class I'm taking today and during our break a co-worker and I who are taking the class together started talking to the two ladies
behind us, also taking the class obviously. One of the women works for a real estate brokerage firm. She starts telling us about all the shady
practices that had started going on only few years ago (she's been in the business for 25 years) that she firmly believes got us into this mess.
She tells us how they purposefully falsified numbers (income, etc.) in order to approve a client for a home loan whether they could afford it or not.
They also had a don't ask, don't tell policy meaning a client could overstate their income for any given year and the lender wouldn't even ask for
documentation to back it up. She'd seen some people who had filed multiple bankruptcies receive a home loan. If someone couldn't afford a down
payment then the lender would "put up" the money for them but would falsify a document saying that they received the loan from a family member,
adding even more debt to the loan.
This all blew me away. She then made the connection that this made the construction and housing industries boom. Creating more jobs and whatnot
making it look like the economy was just peachy. This, of course, also created the housing bubble. Suddenly all these people who otherwise wouldn't
have been able to own a home were buying houses left and right. It was ALL artificial. Every last bit of it.
So I'm sitting here wondering why all this was allowed to happen. I mean, what she was talking about couldn't have been an isolated incident to
just our area. This had to have been going on all across the country. That's why people all across the country are losing their homes.
Then you think further down the line and realize that these banks that are crashing and asking for government handouts had to have known for quite
awhile that they were going under. You don't just all of a sudden wake up one day and go, "Oh crap. My company is suddenly not doing too well".
There's such a thing as balance sheets, profit and loss statements, assets, etc. At some point they had to have known that all this was catching up
to them (let alone having to know that eventually it WOULD catch up to them) but they just kept giving away money to people who most obviously would
never afford to pay the loans back.
As if almost by fate, when I got onto the net and hit my Stumble button the very first that came up was a short essay about this crisis.
Many politicians and pundits claim that the credit crunch and high mortgage foreclosure rate is an example of market failure and want government
to step in to bail out creditors and borrowers at the expense of taxpayers who prudently managed their affairs. These financial problems are not
market failures but government failure. The Community Reinvestment Act of 1977 is a federal law that intimidated lenders into offering credit
throughout their entire market and discouraged them from restricting their credit services to low-risk markets, a practice sometimes called redlining.
The Federal Reserve Bank, keeping interest rates artificially low, gave buyers and builders incentive to buy and build, thereby producing the housing
bubble. Lenders were willing to make creative interest-only loans, often high-risk "no doc" and "liar loans," in order to allow people to buy more
housing than they could afford. Of course, with the expectation that housing prices will continue to rise, it was no problem for lenders and borrowers
but housing prices began to fall, leaving some people with negative home equity and banks in trouble.
Pretty crazy how it reiterated everything I was just told by this woman just hours ago.
Now we have congress giving obscene amounts of money to these companies that should have to accept the consequences of their actions. Are you really
going to tell me that it wasn't their fault they are in the situation they are in?? Are you going to tell me there's no way they could've easily
seen what would happen if they continued these shoddy practices?
The government has now given out almost $300 BILLION dollars to these companies. Where do you think that money came from?? Hmmm...I don't know...as
a guest speaker on NPR said this morning on a radio show "Presto Chango!" The Fed just printed up the money. We have nothing to back that up.
This is putting us out EVEN FURTHER.
Then I had to sit there, on my way to this same class I had this enlightening conversation, and listen to multiple people call into the show and ask
the exact same question, "Where was MY handout when my small business went out of business because I couldn't afford the high price of gas. The
high taxes. The rising cost of goods? WHERE'S MY HANDOUT."
I have to admit, I cried. This was ridiculous. Why is this happening and why did they LET it happen?
I guess this is mostly just a rant and vent. But hopefully someone can help explain the situation more. I just can't accept that they had no idea
something like this could happen. And if that's the case, why would they let it happen?