Last week a Romney remark prompted me to revisit the causes behind our national economic mess. Romney opined that our mess was created by irresponsible people whom had borrowed more money on their houses than they knew they could ever pay back. Don’t get me wrong!! I personally support any Republican that will bring change to the change of the last Presidential election. That said, I believe that one of the big problems with today’s political races stems from our desire to have every major issue distilled to a sound bite! Sometimes this results in foot in mouth disease. Many issues, like our mortgage mess are much more complex than a sound bite! A natural path for our twisted human nature lays in scapegoating the folks without power or money for a problem because they are not in any position to make an effective defense.
Let’s lay the ground work for concluding this discussion by recapping the ground covered with last week’s article. Wall Street figured a way to make a lot of money bundling up mortgages and selling them as a security instrument. They needed grist for their mill so they found allies with the Senate Banking Committee ran by Frank and Dodd. Playing Frank’s political fiddle, they got him to enable legislation for the securities in the forms they wanted and to get additional regulations put on Freddie and Fannie, which they in turn took downstream to pressure the banks to push harder to get more people in houses so they generated more mortgages to securitize.
Greed added to greed as the folks at every link in the food chain took a great gulp of money for their part. Last week we used a hypothetical owner/borrower, Joe You to illustrate the path You mortgage took from originator to investor. Let’s build on this. We acknowledge there were other folks like You’s cousin, Greedy Need-it-Now that just had to have the boat, BMW, and a Bahamas trip which was paid for by a second mortgage! Those loans were thrown in the bundles for good measure (or sure disaster). The wholesalers doing the bundles found they could borrow huge sums to assemble the bundles and add it onto the retail price Wall Street extracted from the final investor. This diluted the ratios that the actual home values collateralized the pools by to the point that most pools were underwater in actual value from day one. The pitch given the final investor was that because of the underlying 30 year term and long historical and constant rise in national real estate values, the securities were still very safe.
When the economy went through its cyclical stutter, as it was glutted worldwide with money invested in these phony baloney securities, the house of cards crashed! Let me underline again a main point of last week’s article. The money that was lost to the economy was not simply the equity lost in the drop of the aggregate values of homes lost by You and his Need-it-Now cousin; which certainly would have been enough for a major economic jolt as it added to billions. Realistically the World economy lost this: money invested by final investor less what Greed’s and You’s houses sold for after the expenses of foreclosure were deducted from the price the REO department sold Cuz and You out for. This real amount totals in the trillions.
Respected economists know this, the political folks and media do not want to talk about it because they know its consequences are so great it’s the stuff 1929 scares and resultant crashes are made of.
I am a realist and as with most people, for the world to be right, they need to think like me! We need to realize and deal with our nation’s precarious economy on a realistic basis. Present leadership refuses. They are stuck on government/economic models that have been tried thousands of times to result in failure every time! “More government, more programs will fix it”, they say. Let’s mention the Post Office and Social Security as examples of government fixes on our way to looking at this round. TARP gave huge amounts to banks. Leadership created HAMP they said to give folks like You a loan mod to keep You in your home. How well did that work?
The banks made money on TARP money but not by helping You! HAMP jerked Joe You around for a year but didn’t give You a mod. Finally Greedy Bank foreclosed on You! I was right in the middle of the mess, trying to be the honest one and help You get a mod! I came to realize several things. We had lost so much money as a nation that the banks simply would go broke if they let very many of You reduce your mortgage to present market value. Fannie/Freddie and banks all knew it and had no intention of giving You a mod. The administration knew it and only said they were creating a mod for You to shut You up. Their agenda was adding to government!
You felt outraged and blindsided! I felt the same way!!! Yet Romney and so many others blamed You because “he knew darn well he could never pay that loan back.” This gets real personal! We had loans too. I based all my retirement plans on paying them back!!! I kicked in about $20 K and bought a piece of junk rental in my neighborhood to get rid of rowdy neighbors in 04 . I spent my labor and a couple grand to clean it up and get a decent tenant. A year later, the market said I could pay it off and have $50K back in pocket ( never be able to pay it back Romney—really????) but I chose to refi, built it’s and my neighbor a new house and bought his. That assembled enough land so I could build a small office complex for retirement income across from what was to be our East Coast retirement home for visiting grand babies. Things crashed. My banks refused to work with me but they did lie to me about a lot of things! They sold all three East Coast properties off separately, along with three others as the dominos fell and now some happy little owner has a piece of junk that will contribute to its local economy for years as a cobbled up old house instead of an office complex. Anyone willing to venture a guess how much more loss our national economy has from similar situations?
Romney and many others want to tell me that it’s my fault as I never intended to pay anyway? Ridiculous and insulting! My whole retirement depended on it!! I have no plan “B”! As a seasoned professional in the industry I spent time and money in a responsible disciplined way planning it all—now nothing to show for any of it and someone blaming me for the whole thing??? Wow!!!
What about that Greedy Wall Street group that actually knew they put my mortgage in a diluted bundle and sold it to a cat in Europe and got $40K more for it than my junker rental was worth? Who’s looking for that jerk? His greed darn near broke the country—might still! That sucker worked in a dark back room office and got Frank, Fannie, and Greedy bank to help him pull his con off! Now he has an administration covering Wall Street’s and friends back side and giving them more money—right George Sorros???? Maybe I am stupid Romney, but I did not know! I was not checking on Wall Street as I had trusted you pols to do that—my bad!! When will I ever learn??? I was a taxpayer trying to make a living! Wall Street knew! He looked at the numbers and worked the con every day for a few years, stuffing my retirement in his pockets before his greed finally killed his golden egg laying goose! Poor guy—now reduced to driving Cuz’s old BMW.
Romney, I can’t speak for You, but this whole mess and people like you blaming me flat out ticks me off!!
Learn about Lamplighter Realty, Lamplighter Financial, and Distressed Property Academy at callgene4realestate.com. Watch for revisions of his new web-site as well as the opportunity to receive these articles to your email if you choose. For your real estate needs, call Gene’s message center for Lamplighter Realty 866-931-4684 or dash off an email to him at firstname.lastname@example.org. God Bless!