July 20, 2008

  • Debt for the dozens...

    Borrowers and Bankers - A Great Divide -- NY Times

    "So asking Main Street to bail out Wall Street leads to this inevitable
    question: Weren’t the financial folks the ones who helped create the
    mess we’re in?"
    "On the ground, this translates into millions of troubled borrowers,
    left to work through their problems with understaffed, sometimes
    adversarial loan servicing companies. If they get nowhere, they lose
    their homes. Taxpayers, meanwhile, are asked to stand by with money to inject into Fannie Mae and Freddie Mac, the government-sponsored mortgage finance giants, should they need propping up if loan losses balloon."

    It is scary what's going on. Admittedly, I'm lucky enough to be shielded from a lot of this. What would have happened if the government chose to bail out the mom and pops, at risk of loosing their homes instead of the big financial firms? The big companies would probably be bought out by a foreign bank- most likely a European bank, given the plummeting USD. So, shares would be redistributed. Major executives might have to look for new jobs. And shareholders who have the money to loose, would have taken a financial hit. All in all, it doesn't seem to look so bad. And confidence in the US economy? Come on, as if anyone has confidence now.

    But for the households that stand to loose their homes, it's a different picture compounded by rising oil prices and inflation. I know that you can't necessarily defend the ignorant, but with some of the mortgage industry just cranking out loans, it's a siren's song when you're told that you can afford the home of your dreams. And when the bank tells you you can afford it, and you get that big "Approved" stamp, you accept it because you trust the experts wouldn't have extended you this money if you were a bad investment.

    It's tempting to look at the housing crisis and think about the houses we could buy at discounted rates. But part of that story is the person who had to move out because they couldn't afford it anymore, whose dreams of raising a family and making some wonderful memories in the house are now tarnished.

    The Debt Trap - NY Times
    "Eliminating negative feelings about indebtedness was the idea behind MasterCard’s “Priceless” campaign, the work of McCann-Erickson Worldwide Advertising, which came out in 1997."