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Another reason to consider Obama

On Tuesday, Barack Obama wrote an opinion piece for The Financial Times about the subprime mortgage mess. He characterizes it as a crisis that is just beginning - which is true - and one for which dishonest lenders should be punished. And those who were facing defaulting on their mortgage should be helped, so that they can keep their homes and keep paying their mortgage. It's the boldest statement - and the one most on target - from a presidential candidate on the topic:

The implosion of the subprime lending industry is more than a temporary blip in our econ­omic progress. It is a cancer that, given today's integrated financial markets, threatens to spread with devastating impact to housing and to our economy as a whole, unless we act to contain it.


There is a reason why this has happened. Over the past several years, while predatory lenders were driving low-income families into financial ruin, 10 of the country's largest mortgage lenders were spending more than $185m lobbying Washington to let them get away with it. So if we really want to make sure this never happens again, we need to end the lobbyist-driven politics that made it possible.


The real victims in this crisis are the millions of borrowers who followed the rules, whose only crime was taking out mortgages that lenders told them they could afford. Normally, these borrowers could avoid foreclosure by refinancing their mortgages or selling their homes. The problem today is that they cannot refinance because no one will lend to them, and they cannot sell because the housing market has fallen. With some arguing that the effects of the worst subprime loans will not be felt until 2008 and 2009, this may be just the beginning.


If we are serious about stopping this crisis and preventing much larger turmoil in US housing markets, Washington needs to stop acting like an industry advocate and start acting like a public advocate.

This guy should be President.



While I agree that Obama should be president, I have limited sympathies for all of the borrowers and lenders who have screwed themeselves.

I'm not sure which is worse, the people who entered into adjustable rate mortgages (what part of "adjustable" didn't they understand? - I mean, did they really think that it would adjust DOWNwards?) or the idiots who thought that it was a bright idea to lend hundreds of thousands of dollars to clowns who could barely afford the 12-piece bucket at KFC, let alone their new mortgage payments. They deserve each other. The problem, of course, is that this mess has far-reaching effects that will probably have the rest of us bailing everybody out in one form or another.

Bear in mind that many of these borrowers bought because they assumed that their properties would immediately increase in value (many were hoping to "flip" the properites) and, thus, they were banking on "free money."

This is what happens when there is no regulation.

a howard kurtz wa.post editorial basically saying the same thing as jude here.


as someone who's been watching and waiting for the housing market crash since '04 (ie. way too early), I have little sympathy for these suckers. However it does seem that in certain areas, mortgage brokers and real estate agents were all in cahoots to entice people with no business buying property into doing just that... I suppose an equal amount of blame lies with the industry folks.

But I can't help but feel scorn for idiots who watch "flip this house" on tv and think they can do that too, with no money down and an interest only loan, who also think that $400,000 is a reasonable home price for a first time buyer making an income of say $40,000 a year.

Maybe it's time to start actually teaching about personal finance in our schools? Duh.

Of course, it's not just folks out there flipping houses. It's also lower income people who have been lured into the American Dream of home ownership. They--unwisely, granted--trusted "the experts" who were peddling these loans. They were told they could afford it. In some cases, their paperwork was altered to make them more attractive borrowers. Having known one such predatory lender personally and hearing how he scammed people, I do have some simpathy for a segment of borrowers who are now caught short.

That said, let's not forget who the fucking opportunists are in this game. The lending industry is nothing like it was 25 years ago. You do not get a loan from your neighborhood bank, where it stays until paid off, anymore. Mortgages are bought and sold like futures. It's that process that led to risky sub-prime lending. It was a case of hot potato and some businesses finally got burned. Boo hoo.

i absolutely agree--lax credit standards, lack of industry oversight and predatory lending practices have created a perfect storm here. There's no doubt some folks were taken for a ride. The federal government was complicit as well--the friggin' fed chairman Alan Greenspan went around promoting Adjustable Rate Mortagages as the greatest thing since sliced bread for chrissakes. That should be investigated in my opinion.

All I'm saying is that if people used their brain a bit before trusting a salesman (which is what a mortgage broker, a real estate agent, or even a loan officer these days actually are...) and did the due diligence to crunch the numbers before making the biggest investment of their lives, they may have realized some things didn't add up. The greed was not just on the side of the "industry" -- everyone thought they could make some easy money buying a house.

If folks were too trusting or didn't understand the loan documents they were signing, that just reinforces my feeling that we do a shit job of teaching kids about personal finance in school. Maybe because we want them to charge up their credit cards and rack up piles of debt, to keep the economy up and running?

Well, the president DID tell us to keep shopping...

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