Loving the San Francisco Bay Area... Community development, urban ministry, trying to defeat poverty, faith, religion, politics, good music, the quest for the perfect pizza, the Yankees, motorcycles... All in a 'day's life'

Thursday, November 29, 2007

Mortgage Blues

At the Sojourners website, author Danny Schechter has an interesting comments about the current mortgage meltdown, the forces that drove the crisis and the dramatic impact on the broader market and the eventually on the poor. He writes: 
"How was this allowed to happen? These days, instead of holding onto mortgages they make, most banks sell them to Wall Street. There, prominent firms make millions recycling mortgages into securities and other exotic financial instruments, often using them to provide financing for even bigger deals—and sanctioning the unrestrained greed and unregulated chicanery of the predatory lending industry.

It became a classic “the emperor has no clothes” story when it was revealed that many of those “asset-backed securities” had no real assets behind them. Suddenly, the paper proved worthless and the markets panicked. Soon there was a “crisis of liquidity” in financial circles, as it became clear that bad deals had been funded by bad debts. That’s where we are now: trying to figure out what’s real and what’s not, as the markets melt down and mortgage companies that engaged in predatory lending implode.

It’s a major crisis, impacting the people who can least afford it. In September, the Federal Reserve cut interest rates by half a percent—a move that will help bail out bankers, but not the people who are suffering under the burden of debt and foreclosures."
The article then calls for a "a moratorium on all foreclosures until we have a full investigation of the discriminatory and illegal targeting and deceptive marketing used by shady mortgage companies—and of the collusion by investment banks and hedge funds." I'm not sure I'm ready to go that far yet. While I applaud the call to investigate the shady deals that were made and the tactics that brought the vulnerable into the market, I believe that in many cases the borrowers were speculating and knew exactly what they were doing. Bailing those who gambled on the market with borrowed money isn't appealing to me. Helping the poor certainly is. Before we go into a knee jerk reaction I suggest everyone takes a breath and approaches the issue with balance and clarity. Let's aggressively prosecute the predatory lenders, bring aid to those who were duped into bad deals, but let's also hold irresponsible borrowers accountable for speculative decisions. 

Schechter closes with a great observation about our society and the manipulation of the preditory lenders.  Ultimately, as is always the case, unchecked market forces make the 'rich richer and the poor poorer." This furthers my belief that we must educate the people, and help them become responsible stakeholders in society. Beyond welfare - to true ownership.  
"Beyond that, we also need tougher regulation of the whole credit industry, including the predatory practices of credit card companies and payday lenders. These form part of the growing “financialization” of our society, which transfers more and more wealth from the people who have least to those at the top—a process that, in the case of the mortgage meltdown, has now put the entire global economy in jeopardy."

No comments:

Post a Comment