Monday, December 29, 2008

A Troubled Economy

Our economy is in trouble. Is there anyone denying that?

If you are denying it now, just wait a few more months, and I can assume you’ll be recognizing the effects of the mortgage crisis, banking and auto bailout, and the increasing employment issues facing our country.

So, who’s fault is it?

I happen to be of the school that believes there is plenty of blame to go around! Both Republicans and Democrats in Congress are responsible for where we are now. Then again, so are millions of Americans who bought into the “easy money” lies that have been “preached” for decades and decades.

However, to no one’s surprise, the name calling has begun!

Just last week, the White House began pushing back hard against a New York Times article that essentially blamed President Bush for the sub-prime mortgage mess and the Wall Street collapse.

In a 5,000-word article in the Times on Sunday, under the headline, “White House Philosophy Stoked Mortgage Bonfire,” said Bush was also encouraging a “hands-off approach” to regulation that encouraged “lax” standards on behalf of lenders. “He pushed hard to expand homeownership, especially among minorities, an initiative that dovetailed with his ambition to expand the Republican tent—and with the business interests of some of his biggest donors,” the article said.

“That’s about as myopic as you can get,” White House spokesman Tony Fratto said in response.White House counselor Ed Gillespie lashed out at the Times for its interpretation of Bush’s housing policies. “They’ve had to mortgage their building in Manhattan to help make ends meet, and they’ve been reduced to junk-bond status. I don’t know if the New York Times’ shoddy reporting is the result of being in junk-bond status, or if their junk-bond status is what’s resulting in their shoddy reporting,” Gillespie said.

In fact, the Times’ article ignored a wealth of its own reporting, dating back to the era of Bill Clinton, whom the article mentioned only once, in passing. For example, in September 1999, the Times noted that, “Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stockholders to maintain its phenomenal growth in profits.” The 1999 piece went even further: “In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.”

Likewise, the Times made no mention over the weekend of President Clinton’s aggressive deregulation of the financial services industry, which empowered banks, brokerage firms, and insurance companies to engage in some of the very practices—such as credit default swaps—that contributed most to the current fiscal crisis.

While the Times mentioned that mortgage bankers and brokers donated almost $850,000 to President Bush's 2004 reelection campaign, the newspaper omitted the fact that the top three recipients of campaign contributions from Fannie Mae and its sister organization Freddie Mac over the last two decades were all Democrats. Connecticut Sen. Chris Dodd, head of the Senate Committee on Banking, Housing and Urban Affairs; President-elect Barack Obama; and Bush’s 2004 opponent John Kerry all benefited from Fannie and Freddie.

I hate shoddy reporting. I hate even worse when people with an agenda write about their opponents.

Let’s face it folks. The current economic situation didn’t happen during President Bush’s term in office. The problems leading to where we currently are began happening in the 1980s and 1990s.

So, writers, editors, and reporters can take the coward’s way out and blame President Bush (if they are more liberal) or President Clinton (if they are conservative). But for me and my house, we’ll go back to what I said at the beginning—there’s plenty of blame to go around!


  1. No question about it Steve. Pleeeeeennnnnttttyyyy of blame to go around. There is lid on stupidity when it comes to this mess we are in. It goes from top to bottom-the richest to the poorest, the most influential to those just barely getting by, Dem or Rep. The bible is true: we reap what we sow. But like you I get tired of shoddy reporting, whether incomplete or with an agenda.

  2. I truly hate that it's happening. When we built our house in Ohio we were approved for a $400,000 home. We almost swallowed our tongues. That was way over our budget for monthly mortgage payments. Well they could give us a balloon loan. You know, it starts low and then progressively gets bigger over the years assuming our incomes would inflate as well. However, we knew we'd be having a baby and I'd be a stay-at-home mom. Not to mention (again) the mortgage payment was way over our budget and our comfort zone. So we built a house that cost us $195,000. Less than half of what we were approved for and only 1300 square feet vs that huge 3500 square foot ginormously beautiful house they wanted us to buy. Oh and builder financing too.

    Well we saw a lot of young folks like us building these borderline mansions. It was seriously hard not to become envious. Houses with 5 bedrooms, 3 baths, huge kitchens, hearth rooms, bonus rooms, 3 car garages, full basements with walk-outs to the backyard, lush landscaping packages, in exclusive neighborhoods, and so on.

    We now know that all of the young folks who took the deal and built the dream home (in their 20s) have all foreclosed or short-sold their homes.

    The builders preyed on the young and "stupid" among us. And even though Rich and I knew better. Even though... we were still tempted.

    We are stuck with that house now. We haven't had a tenant living there since mid-August and we can't sell it. For almost 4 years we've lived in Florida and haven't been able to sell it. So we've rented it out. However, now it's vacant, we can't rent it during the holidays, and we have another house we live in down here (which thankfully we got a killer deal on back in March). But still. We're paying 2 mortgages while about to have our 3rd baby. Talk about hard. But it would have been so much harder had we built that huge house we were so tempted to build.

    Anyway, I blame a lot of this crisis (at least in the real estate market and credit card arena) on the borrowers. They just got greedy. And now they are suffering the consequences of their greed and foolishness. This has caused a sickening snowball effect because now the houses aren't worth what they once were and people like us (responsible borrowers) are suffering as well because we cannot sell our homes. We have owned that house in Ohio for 6+ years and it's not worth what we payed for it. In order to sell it, we'd have to take a $30,000 loss. Who has that kind of money? Not us.

    Sorry for the book, but you opened the can o' worms here. Sore spot. Sore spot. Sore spot.

    Heidi Reed

  3. Excellent take on the situation, Steve. The real kicker is that regular Americans are going to have to pay for someone else's stupidity/irresponsibility/corruption/etc!

  4. Very true - biased reporting will unfortunately always be around, so only half the picture will get painted, but will be taken as the whole truth.

    Most Americans have been following the example we've been shown for years by our government - driving up debt. Now you may or may not agree, but the fact is that our national debt has continued to skyrocket - at the end of fiscal year 1981, the National debt was $994B, and now, it's $11T - with no end to the borrowing in sight.

    Who really "owns" America now?

    Bailouts, stimulus, and debt - Oh My!

  5. Bill, Heidi, and Rick...I couldn't say it better than the three of you have!

    I tend to think the borrowers are responsible. No one puts a gun to your head and says, "Take this loan or else!" Heidi, you hit the nail on the head--temptation. Satan uses all kinds of tools lure us into his snares. In this case, it has proven to be greed...and keeping up with the Joneses...


Thank you for sharing your thoughts! I can't wait to read what you have written.