OUR ECONOMY IS A CHANGING...

Let’s talk a little about our economy and economics in general.

There are today, frantic calls from the public and politicians for the federal government to do something – immediately – to help the worsening economic situation in this country. This to me is a scary situation because when politics start playing a role in economics; things can quickly get out of hand.

Because our financial industry has changed dramatically over the last few years; we have no precedents to go by so economists need to study what is going on and make some serious and sober suggestions and not just “bail out” every person and every company that is in financial peril.

I will blame our government for the “foreclosure / credit” disaster we are now experiencing. When purchasing my first home I was told that there are very strict financial requirements that I need to meet or I would not be allowed to obtain a home loan. I needed 20% down, have money in the bank, a good job, a secure future earning capacity and a spotless financial record.

Obviously, all those strict rules were thrown out the window when non-banks were allowed to enter the mortgage market. These non-bank companies did not care if you could afford your house; they sold your mortgage (sub-prime) to an investor as soon as they closed on it. They made their money, screw the rest!

Why didn’t our government move in to regulate this new industry? People that never had a chance at owning their own home now could; isn’t that great! Money was being made hand over fist and the government was collecting a lot in taxes. Wall Street was happy as shit cause young millionaires were devising more and more, totally bullshit “investment instruments” based on these bullshit mortgages and generating revenue like mad!

Why in the hell would our government want to mess-up a great party like that?

Was anyone paying attention to what could happen to our economy if the inevitable happened; unqualified home buyers could not pay their monthly mortgages?

Now we all realize that YES there should have been regulation and rules but the BUSH administration is having problems with that because they don’t want to “over regulate”, in fact, they don’t want to regulate at all but somehow logic dictates that something needs to be done.

Now I am pretty conservative when it comes to finance and I would always want the “market” to regulate and control itself but since Wall Street has started inventing new money making schemes that can be reckless and irresponsible; some form of regulation or at least a “watchful eye” on their doings, would be very prudent at this time, especially when, as in the Bear Sterns case, they could not police themselves.

The mortgage industry definitely needs some control. I am not advocating going back to the old days where it was VERY hard to get a loan but look what NO rules created, a bloody mess so I think some “intelligent” regulation is in order.

Should we bail-out the people that are in foreclosure on their homes? That is a difficult question where obviously greedy lenders and stupid buyers are at fault.

No one really wins in a foreclosure except for the companies that do the paperwork, so it is in the best interest of both parties if a new, realistic mortgage could be agreed on. The bank gets their money back with interest and the homeowners keep their homes; the government can order lending institutions to negotiate in good faith.

Some politicians are calling for a bail-out where the government would buy the bad loans from the lenders and this would be a BIG mistake because our government, or we taxpayers, would be stuck with the bill.

I will have more on this because this week in Washington is when Congress will debate this whole issue and the Democrats, as always, want tax payer money to bail-out everybody.

Note: Now that our government bailed-out a Wall Street firm, the Democrats are saying, now bail-out the little guy.