26 September 2008

Not quite innocent

Who fostered the cash-in culture in which both Wall Street profit mongering and Washington lobbying are nourished and thrive? We citizens did — red-state conservatives and blue-state liberals, Republicans and Democrats, alike. We may be victims of Wall Street greed — but not quite innocent victims.
Victor Davis Hanson weighs in with some blame:

The profiteering was not just the result of a few thousand scoundrels on Wall Street or in Washington, as greedy and as bonus-hungry as many of them no doubt were. Look at the housing market as a sort of musical chairs in which everyone profited as long he grabbed a seat when the music stopped. Then those left standing — with high-priced loans and negative equity when the crash came — defaulted and stuck taxpayers with debt in the billions of dollars. But until then, most owners who had sold homes cashed out beyond their wildest dreams.


Thousands of dollars in past profits are still in sellers' bank accounts or were spent on their own consumption. If the shaky buyer at the bottom of the pyramid should not have borrowed to buy an overpriced house, then the luckier seller higher up hardly worried that the cash-strapped fool was paying him way too much with unsecured borrowed money.


We created the cultural climate for this shared madness. Television shows advised how to "flip" a house after putting in cosmetic improvements. Real-estate seminars and popular videos convinced us that homes were not places to live in and raise a family but rather no different from piles of chips on a Vegas table.


We created the phony populist creed that everyone deserved to own a house. So lawmakers got the message to relax lending standards in service to "fairness." But Americans forgot that historically nearly four in 10 of us aren't ever ready, or able, to sacrifice for a down payment, monthly mortgage bills, home maintenance and yearly taxes — and so should stick to renting.

Oh, yeah, and people who followed the ages-old wisdom of the past and continued renting until they could afford to pay a mortgage were told they were throwing their money away. But not by banks: I know people who do believe that renting is throwing your money away.

If you’re one of those people try this experiment. Take the average monthly rent for a decent place in your area and run it through a paper shredder. That’s throwing your money away. On the other hand, when you get a place to live in return for that money it’s not throwing your money away. It’s an exchange of value. There is a difference. Not getting equity is not the same as shredding dollar bills.

About Me

James Frank Solís
Former soldier (USA). Graduate-level educated. Married 26 years. Texas ex-patriate. Ruling elder in the Presbyterian Church in America.
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