As we all watch the "dance" being performed daily by our Government and the banks and other financial institutions as they spin around and around scaring the public and presenting more and more "bad loans" in order to illustrate their dire need for funds to alleviate the problem and by the way the spin is so fast that the Banks and other financial institutions are not even required to disclose what the money will or has been used for and continue to avoid this critical element I believe it is "Time to Think Again" about this financial disaster and stop the blame game and focus on solving the problem.
A simple answer is that "we" are approaching the problem from the wrong direction. Congress, the Treasury and the Fed are listening to and then reacting to information given to them by the Banks and other financial institutions and basically trusting that this information is factually true and correct which is not only a huge mistake but actually irrelevant in solving the housing crisis or the credit crisis that has now threatened our entire financial system. No doubt there is much "blame" to spread around for the situation but none of that will create a recovery attitude on the streets of America or the world at large.
I devoted almost 30 years of my life in the arena of manufacturing and the quest to create efficient and profitable operations. I have devoted an even longer period of time in the arena of family and putting together plans to raise and provide for a family of four children, endless trials of illness with my wife and later myself and succeeded in both by never giving up and always developing a plan no matter how impossible the situation appeared. In other words, I've been there and done that as it relates to most problems business or people could present.
Back to the topic at hand. There is no doubt that hundreds of thousands (if not millions) of citizens (and their families) have entered into house mortgage agreements which they should not have and were never actually "qualified" to get in the first place. When requirements to qualify were allowed to become so lax as to not even verify the income of the applicant a mindless rush to live the "American dream" took over from both sides of the table. But, it happened and now people are where they are and the Banks and mortgage firms are where they are. When the floodgates were opened to so many previously unqualified individuals it also spurred a tremendous growth in the home and condo building industry which now that so many cannot pay the debt has left a huge surplus of unsold new homes and a rapid decline on the building of homes which, of course, has caused a quick slowdown of everything related to the industry including employment for all involved. Our Government was certainly a partner in creating the perception that "everyone" should and can "own" a house and provided insurance or commitments to lenders that the Government (we the people) would cover the risk and that allowing the current storm to brew off the horizon and out of mind to most of us.
I would also submit that a large percentage of the people who are in a "mortgage crisis" got there because of spending habits other than the mortgage itself. The pervasive attitude of spending and borrowing and buying things because they wanted those things rather then needed those things has ultimately caused the requirement for money going out to far exceed the money coming in which, if one continues to spend (and extend) enough will always happen at some point. All the talk about sub-prime or adjustable rate mortgages as being the culprit is simply not a valid reason or excuse.
What should be done now?
I will offer a plan and a change from the current approach in my next post. Stay tuned.