Disclaimer: This is not meant to be controversial or political or offensive. It's meant to be a way for me to put my thoughts out there and clarify some points in my own understanding.
All this financial stuff going on is scary, but it doesn't help that the headline on every news outlet proclaims gloom and doom and catastrophe and crash and every other bad scary word you can think of. Bailout? No bailout? I'm the queen of being able to argue both sides of a question intelligently and convincingly, so it's no surprise there are respected people out there on each side. Here are the facts as I understand them, in plain-people-speak:
motivation #1: people want to own houses. it makes them feel good.
motivation #2: the government wants people to feel good. it gets them re-elected.
motivation #3: companies like to make money.
problem #1: people are by nature lazy and will usually take the easy road to get what they want
problem #2: the government did certain things (why? see motivation #2) to encourage and support companies to lend money to people who couldn't really afford to pay it back. (i.e. companies were given assurances by the government that took away some of their good business sense so they were willing to take more risks - motivation #3 - with assurances they'd be supported or bailed out if it went wrong)
problem #3: people took advantage of those no-money-down/stated-income/sub-prime-interest programs (see motivation #1 and problem #1) and bought more than they could afford.
problem #4: When people don't have to work hard (motivation #1) for a down payment and good credit and proof that they can pay back (see problem #2), they value what they have less. When they have no equity in a home, it feels just like renting (i.e. no pride in ownership) and when having bad credit isn't an issue then why not just foreclose.
problem #5: the real estate market goes through normal ebb & flow and ups & downs and right now is a down. This isn't usually a problem, but on top of problems #1-4 it has been magnified.
result #1: People who couldn't afford to make their payments defaulted on their loans. This makes people sad (and homeless)
result #2: Companies are holding loans that are worth more than the securing property is worth. So even if they sold the property, they'd still be in debt. This is bad on a balance sheet and ultimately will cause companies to go under.
result #3: When companies go under it makes people worry and panic. this makes them want to pull money out of banks and sell stocks which makes everything worse.
result #4: The government thinks they need to step in to "fix" everything so people will be happy again. Thus the bailout package. If we do not address problems #1-4 (#5 is normal) then we are bound to repeat the results again and nothing will actually get fixed.
Here is an article that is written by an economist that really explained the issues well.
I don't know what the solution is, and I hope (and trust) that there are smart people out there arguing each side and thinking it all through and coming up with a plan. But one thing I am frustrated about is the fact that all the blame is falling to the companies and the government (as rightly some of it should) while there is no discussion at all of the people's responsibility in all of this. We all need to harken the counsel we've heard over and over to get out of debt and live within our means and take responsibility for ourselves, so we'll be in a better position to weather hard times and to help one another when necessary.
Disclaimer: I am in no way judging anyone else's choices or intentions or holding myself above anyone else. This is meerly intended to be a commentary on general concepts and does not preclude my sympathies with individuals who find themselves in hard circumstances at this time. Life is all about learning from our mistakes and improving ourselves and doing better next time, myself included.
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8 comments:
Well put.
well stated, sarah. and that was a good article, too. it's just like bailing your kids out of the trouble they get into. it's total enabling and encourages more bad behavior. someone needs to go sit in a corner.
I am just hoping this two day holiday turns into a two month holiday. The stock market gained at least half of what it lost yesterday. I think it is best to let those who got us into this mess not be the ones to try and fix it. Good post.
Good points Sarah. Some of us (who don't watch the news as much as we should - so embarrassing) appreciate having it all put out there in one big chunk vs. all the bits and pieces that the news gives us.
nice. The only thing I would add is...people who are getting kicked out of their homes are not actually homeless, they just have to rent. And heaven forbid someone RENT instead of OWN for a while!
The entire lack of personal responsibility is really annoying to me.
I completely agree. I hope that if I had been the one in trouble, I would still agree and choose to learn from my mistakes instead of relying on someone to bail me out of trouble.
Sarah, what an awesome statement. You're so right, and expressed many of the thoughts that've been in my head, too--enough of the gloom and doom. I've stopped listening to the news.
You're right about responsibility for everyone; no one likes the words "bail out," but the responsibility belongs to everyone who knowingly made/allowed the mistakes to be made. Live within your means indeed!
On a happier note, based on those "live within your means" principles and this being such a good time to buy (*not* sell!), we were able to get a great house at a great price. So there are some good opportunities, even in the gloom/doom time.
Love it. Thanks for talking about this, that article gives great info. I just know everything will be ok in time. We just need to settle down.
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