Sunday, September 21, 2008

The Mortgage Crisis and how George Bush tried to fix it 5 years ago

My take on the mortgage crisis is simple. People were allowed to get into homes they simply could not afford. When T and I bought our first home, there were many, many different types of loans we were offered. 30 year fixed, 3 yr ARM, 5 year ARM, Interest only loan, even a loan where you could pay whatever you felt like. I'm serious. We were actually told about a loan where you could decide what your monthly payment would be. T and I decided that some of these loans were gimmicks to get people into a mortgage that was beyond their means. We opted for the 30 year fixed, got a great rate and have been happy since. My point is, back then (in 2003), these gimmick loans made home owners out of EVERYONE. Anyone could buy a house. Now, these people (that maybe should not be given a loan in the first place) got into a mortgage that they could afford in 2003 suddenly cannot afford it, and boom! Mortgage crisis! I hear and read news reports about how we are going to fix this problem. Well, I have always believed that in a free market economy, things will work themselves out by themselves. I told T that unfortunately, some of those people that got in over their heads with those gimmick loans might have to sell their homes (at loss probably) and move back into an apartment, or with family. After all, for the most part, people should take ownership of their decisions. As for these companies that offered these crazy loans to people, they too should be held responsible for their business decisions.

But these gigantic banks (that have trillions of dollars of loans out there) going bankrupt isn't good either, so I believe our federal governement should have tighter reigns on them. George Bush believed that too. In fact, in 2003 he recommended an overhaul of the housing finance industry. Read the story here. According to the story, the Bush Administrations plan included a new agency that would supervise Freddie Mac and Fannie Mae. Their supervision is currently the job of the U.S. Congress. Democrats in Congress killed this proposal.

Here is a quote from Barney Frank (D - Massachusettes) ”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

All they were concerned about is making housing affordable. Well, I for one, don't like the fact that I, Joe Taxpayer have to pay for bad decisions by other people or businesses.

And, another thing, I know George Bush isn't perfect, but I don't think he deserves all the blame he gets. This story proves that.

links to this post
Barney Frank said that because the people running Freddie and Fannie (and now running Obama's campaign) paid him very nicely to do so. Not a bad gig if you can get it! :)
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