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Mar. 12, 2010 Well over a year into the bank/financial institution/real estate bail-out things are still looking grim and the government is still printing money. Trillions of dollars of taxpayer money given to huge companies that knowingly took very foolish risks with client/citizen/taxpayer’s money in order to enrich themselves has led to more of the same. Investors/homeowners whose money was lost have gotten nothing and by government decree have been forced to give even more. The foreclosures roll on and more and more lives are ruined. Let’s look at the real trigger of this crisis. It is obvious that the lending/investing habits of the major financial institutions was not sustainable indefinitely, but the whole house of cards was really supported by consumer mortgage payments. As long as those monthly payments came in on time each month all of the other problems were easy to ignore. After all, a lot of money was being made. The unraveling started with home owners unable to afford the increased monthly payments on the adjustable rate mortgages(ARM's) their mortgage broker or bank talked them into(probably many could barely afford the low introductory payments). The big financial institutions had not planned for even a slight slowing of economic growth, which meant fewer and smaller pay raises and more difficulty refinancing those ARM’s. Looking at the possibility of huge numbers of mortgage defaults the banks got nervous. Then the mortgage insurers(AIG, etc...) got nervous. Then the companies backing and depending on the insurers(Lehman, Goldman Sachs, etc...) got nervous and the big machine started to slow and creak and squeak. The crisis really began with slowed economic growth and the resulting inability to meet an increased monthly mortgage payment. Shouldn't the solution start there also? How many people would have remained in their homes and current on their mortgages if the government had offered them a few hundred dollars per month to make up the difference between introductory rates and ballooned rates of the ARM’s? At least until a refinance solution could be worked out by congress and the banks? Would the major financial companies have been so panicked if all those mortgages were getting paid by the government? Would simply keeping peoples' mortgages current have been any more expensive than the actual bail-out? How differently our government would be seen if all those trillions of dollars had been used to keep people in their homes instead of keeping huge, greedy companies afloat. What a PR coup that would have been for Washington. Maybe happier taxpayer/citizens would have taken some of the partisan edge off. We will certainly never know. Make no mistake, the irresponsible risk-taking and greed of Wall Street, Inc. would have to be addressed. But keeping the mortgages paid would have defused the immediacy of the situation. The worst thing about the way this has actually played out is that most of the serious underlying causes of the crisis remain unchanged. Huge global financial institutions were save from bankruptcy so everything will return to normal. That is not happening because the old “normal” was never a sustainable economic model.
It is too late this time but this or a similar problem will happen again in the future. Next time I hope our government has the backbone and the common sense to look for solutions that address the real cause of the problem. The current financial crisis was not caused by huge banking and investment companies facing bankruptcy. The current crisis was caused by home owner’s inability to pay escalating monthly mortgage payments and this cause was never adequately addressed by any part of the bail-out.
Enjoy hiking and canoeing the Tampa Bay area and photographing the birds and other wildlife. Nature is my meditation and keeps me in balance. Web Sites: The Zen Estate, my personal blog - http://zenestate.blogspot.com/ St. Pete Real Estate Examiner - http://www.examiner.com/x-38756-St-Petersburg-Real-Estate-Examiner Creative Vision Investors - http://www.creativevisioninvestors.com/ Florida Image Tools - http://www.floridaimagetools.com/ Facebook - http://www.facebook.com/home.php?#!/john.w.rivard?ref=profile
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