What a mess.
I don’t remember much of the 1987 Savings and Loan crisis – but history says this was a tumultuous period in the US; particularly for the economy. The government had to step in and implement a $50B bail out of the S&L’s and get the economy back on track.
Today, the Senate is taking a bill to the House authorizing up to $700B in bail out funding for major finance institutions who are carrying a large percentage of toxic mortgage debt. I’m constantly amazed how desire takes control and becomes such a driving force. In this case, when the housing market was heating up a few years ago and interest rates were near historic lows, lenders loosened credit restrictions to the point where anyone and their dog could get a mortgage at a seriously low interest rate, making the american dream – a home – a possibility for many people who otherwise should not have been able to afford it. That’s instance #1 of greed – cashing in on all those fresh mortgages that never could have played the game before.
Instance #2 is what really gets me. Now that home values are dropping and interest rates are going up making mortgages too expensive for most people, instead of forcing those people who can’t afford to pay higher interest rates into default and foreclosure, why don’t these banks just offer some interest rate relief to the mortgage holders and stave off much of the financial nightmare from happening? Apparently 3-5 years ago when interest rates were lower most of these folks could afford their payments. You do hear about some people calling banks to negotiate their mortgage payments, but why not have the banks proactively try to save their business by calling them?
I don’t claim to have all the information on this topic so I can’t make a much more passionate case than this. But I do think we are seeing the real-life effects of excessive desire and greed.
