Alternet: Subprime Is Really SubCRIME: America's Deeper Financial Crisis

[El Pinko]

http://www.alternet.org/workplace/77375/


Subprime Is Really SubCRIME: America's Deeper Financial Crisis
Policy proposals are not enough to save the economy. Candidates, take note.

By Danny Schechter, AlterNet. Posted February 21, 2008.

Hillary Clinton and Barack Obama now have their instant 10-point plans and programs. They have dipped into John Edwards' tool chest for ideas on fighting poverty and listened to policy advisors who have come up with a laundry list of proposals for stop-gap measures from hikes in the minimum wage and middle-class tax cuts. All of these proposals will take time to implement and probably will be forgotten by the time one of them becomes president, if they do.

Meanwhile the economy is collapsing because of crimes and irresponsibility on Wall Street, and no one is really talking about that. An inequality gap and structural crisis compounded by profiteering in high places goes on and is largely ignored.

....

Who is responsible for this, and who is being made responsible? Why aren't we talking about these massive losses and the growing debt burden? Why is this issue not on the political agenda save for the efforts of a few advocacy groups on the left and Ron Paul on the right?

It was discouraging when our government's leading critic of these practices got so discouraged that he quit last week. David Walker, the comptroller of the currency had warned back in 2005 (as reported in my film In Debt We Trust):

[El Pinko]

1. kick

nt

[sergeiAK]

2. There were two parties to blame for the subprime mess . .

Lenders (ie Citi, Countrywide, etc), and Borrowers (ie those oh-so-sympathetic people who borrowed more than they knew they should and are now in trouble). I say let the lot of them twist in the wind. The banks knew underwriting these loans was a risk. They lost, too bad so sad. Better luck next time (if you're still in business for next time). As for the borrowers, I'm all out of care if you borrowed a huge sum of money on an ARM and now can't pay it nor refinance because your credit sucks. This is why people rent apartments and houses, because they can't afford to buy.

This is how the free market is supposed to work. It's not always pretty, it's generally painful to some, but in the end; play stupid games, win stupid prizes. Unfortunately, we have Bush planning to bail out the lenders and some of the borrowers, and Clinton/Obama planning to bail out the borrowers and some of the lenders. Neither group deserves a bailout, they played the game and lost. Screw 'em.

[blondeatlast]

3. If both parties get screwed, responsible borrowers suffer from

plummeting home proces. sure, prices were inflated and need to level out--but hundreds of abandoned homes in your neighborhood is not leveling out. It ruins things for responsible buyers.

[El Pinko]

4. That's the way it goes - appreciation is NOT supposed to be guaranteed.

When you buy a home, you agree to pay your money, and you get a house in return. That's all. If the value of it drops by half in a year, that's the breaks. You still have your house, and your property taxes will be lower.

If you bought before the boom, you are losing nothing but illusory equity. If you bought at the peak of the boom, I'm sorry, but you weren't very observant.

[sergeiAK]

6. Exactly. Investments carry risk. nt

[sergeiAK]

5. Responsible borrowers are already screwed

And if we bail out subprime mortgages, they'll be even more screwed. Home prices are significantly down now and will continue to go down for another year or so. If we bail them out, they get a 3% mortgage, while the rest of us pay 6%. Bailing these people out is rewarding stupidity and irresponsibility. That is unconscionable.

Eventually, the capital being put into the market by investors will start to bring prices back up. It's already happening here, and in many other areas, investors/speculators are buying up these foreclosures and renting them out, sometimes to the people who have been foreclosed upon.

It will benefit a few people though. Those coming out of college now, with a decent job, will have their choice of houses, at significantly lower prices than 3 years ago. I've gone from not being able to afford to buy a house when I graduate, to being able to buy a decent starter home in most of the markets I'm looking at. Investors will also benefit, though with a significant amount of risk.

Either way, the responsible people will be hurt, but if we bail out the borrowers/lenders, we pay in both deflated prices and inflated currency. Not to mention the message of "it's ok, the government will save you from your bad decisions". That's dangerous.