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I WOULD GLADLY PAY YOU TUESDAY FOR A HAMBURGER TODAY
12/04/2007
I had a brief conversation yesterday with a conservative Republican woman who was complaining that the federal government might try to help out all those homeowners who are in danger of losing their homes because of the sub-prime housing meltdown.
She was referring, I believe, to talk in Washington about giving some breathing room to lower income buyers who are in danger of losing their homes because of a scheduled increase in the interest rates on their loans. Both Congress and the President have considered many ideas to keep the mortgage meltdown from getting worse. Some have asked banks and other lenders to voluntarily postpone foreclosures, help the buyers refinance, or postpone the scheduled interest rate increase. Others are proposing possible changes in laws, including banking and lending laws, to prevent such crises in the future.
The woman who was complaining was doing so because "my husband and I worked hard for everything we have and I don't think these people should be allowed to get away with this. I don't think they should be bailed out." Her assumption was, apparently, that homebuyers who signed up for sub-prime loans, and loans with low teaser rates, did not work hard for their money.
When I suggested to her that government officials weren't just concerned about all these people losing their homes, they were more concerned about what this might do to the banks and especially to the larger economy, she said "I know, I know, they're worried about a recession. But I don’t think those people should get away with their irresponsibility."
When I then suggested that it wasn't just the buyers who had been irresponsible – it had been the lenders and mortgage brokers – and that the professionals in the lending industry had been far more aware of what they were doing than many buyers had been, she softened a bit, and allowed herself to remember a conversation she had with a local mortgage broker who told her that his company had often talked sup-prime borrowers into purchasing a home when they were reluctant. But she quickly returned to her original opinion about the irresponsibility of buyers. "They should have known better," she said. She did acknowledge, though, that the lenders knew much more than many of the buyers, who only wanted to own a home and who were suckers for the "teaser rates" offered for the first three years, and that these buyers counted on being able to afford the rise in interest rates that would come down the road.
She went back and forth like this for many minutes, allowing herself to see both sides, before she returned to her original perspective, which was an emotional and a personal one. "People think they 'deserve' a home. They don't deserve a home; they have to earn it."
I realized as I listened to her that I didn't actually disagree with her. I, too, think people who are purchasing something as expensive as a home need to educate themselves and only purchase it if they believe they will be able to afford it even when the interest rate goes up. I agree, as well, that no one deserves home ownership, though I do believe people who are doing their best to earn a living, even if they make very little money, have a right to some kind of shelter.
But the reality is that these home buyers (and here I am talking only about people who purchased a home to be used as their residence, not those who bought homes as speculators, hoping to flip the home in a year or two) simply did what they had been programmed to do by banks, credit card companies, retailers, catalog companies, car companies and every other corporation that sells goods and services to the American people. They bought something today with the hope they could pay for it tomorrow.
What is the credit card industry, after all, if it is not an industry devoted solely to allowing people to have goods, services, toys, luxuries, and all kinds of necessities as well as frivolous things, without having to pay for them today? The credit card company can only make money (and they make tons of money) if they can convince you that it is better to borrow money to buy something now (even though you will pay interest), than to save your money and buy it later.
We are an instant gratification society. We want things now, because we are addicted to consuming and because have been programmed to believe that tomorrow may be too late. The things we want will not be there (so they tell us) or they will be much more expensive. So the credit card companies generously offer to help you buy now and let you pay later. The buyer in this case must believe not only that he will have the money to pay later, but that he will have the money to pay for all that interest in the meantime.
The only difference between a credit card purchase and the purchase of a home is that the home is more expensive and the money paid out in interest is a gigantic number. But the principle is the same.
American capitalists have been playing this game for decades with the American public and now that their game has infected the housing industry we are in a big mess. Banks are not lending, citizens cannot borrow, homeowners are losing their homes, houses are sitting vacant, real estate companies are losing money, construction companies and developers are laying off workers, civil engineering firms are downsizing, retailers are seeing a drop off in sales of all their products, and economists are crying "recession."
So to my conservative Republican friend who wants to blame homeowners who now need help from the government I say "We don't live in a cash society anymore. We also don't live in a free market society anymore. We live in a society that operates on the basis of credit and, like the character Wimpy of the Popeye cartoon, 'would gladly pay tomorrow for a hamburger today.' The home buyers who are now suffering were only doing what the corporate big shots have been programming them to do for decades. They bought something today in the hope they could pay the interest now and then be able to afford the increased interest that would come along in three or more years. They believed the myths of upward mobility and the "American Dream." They lived for today with hopes for tomorrow. And who among us doesn't?"
The real culprits here are the lenders and the mortgage brokers, who didn't give one hoot about whether or not an individual person finally achieved his or her dream of home ownership. They only cared about the fees they would get, or the interest they would receive on the loans that many knew could never be repaid in full. What many of them are now finding out is that the gamble they talked these buyers into taking was a gamble that hurt them as well – and not only them, but the entire society they live and work in.
These are the people who have been irresponsible, and this is the reason that the "free market" doesn't always work. As Democrats have been saying for years, government is the only entity that can keep corporate American from mischief, and government does that by responsible regulation. If government does not implement such regulations, then this kind of thing will happen again and again, and government will ultimately be called upon to bail out the victims of bursting bubbles that are always the result of unregulated "free markets."
We could have all been spared a lot of pain if these loans had never been given, and if the bubble had not been allowed to grow so large. Some people might not have been able to buy a home, but then they wouldn't have lost it three years later either. Others might not have made as much money in the real estate boom, but ultimately they - and especially their fellow citizens - would have been better off.
Wouldn't it just be easier to allow government to have more oversight of markets, and to implement some basic regulations that could protect all of us from the greed, fraud and abuse that always manages to work its way into the "free market?"
-Ellen Terich
All content © 2005 outragedcitizen.com
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