From the RGJ:
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Before the town hall meeting, Obama stopped briefly at the Las Vegas residence of Felicitas Rosel and Francisco Cano, who are worried they might lose the home they bought three years ago with an adjustable-rate mortgage. “At the beginning it was OK, but all of a sudden, it started going up and up,” Rosel told Obama.
Tighter regulation of lenders could have prevented their plight, Obama said. “A lot of this wouldn’t have happened if we had done a better job of regulating the banks and the mortgages. Nobody was watching them,” he said.
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Wha's left unsaid: tighter regulation may have prevented the problem. It would likely have prevented it by prohibiting them from buying a home in the first place. There are probably some people who didn't need fancy mortgages but got them anyway. But there were many more (I am guessing) that needed fancy mortgages to be able to "afford" what they purchased.
So we have the quandry - in hindsight, we wag our fingers at the banks - "shame on your for your loose credit!" As it was going on, we cheered the increase in home ownership rates - "More people are living the American Dream!" We need clarity when people talk about the implications about their calls for more regulation. There is no middle ground - we have to be able to admit directly that we should have prevented the Canos from owning a home. Better lending standards squeeze out those on the low end of the ladder. Even if the government takes the (in my opinion) wrong-headed tack of propping up overvalued homes, it will only discourage home ownership by keeping homes unaffordable; unless we want the government to be in the business of buying overpriced homes for people, we can't have it both ways.
I am therefore curious about the significance of Obama making a photo-op stop at this couple's house. The implied message - "it's the bank's fault you might lose your home" is a half-truth. Obama's solution, implemented retroactively (as he seems to suggest the problem was in the past) means they never get the house they stand to lose in the first place. The truest message would be "it's the banks fault you were ever allowed to purchase this house to begin with." That is, however, much less people-friendly, and I doubt the Canos would want the photo-op at their house if that message were clearly understood.
Edit: Another source for the story confirms my suspicion - the Canos are not big wage-earners. They are a maid and a porter at the Bellagio. There is, I'm sorry to say, probably no reason they should ever have been allowed to purchase in the first place.
Wednesday, May 28, 2008
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You have brought up an interesting point. The real cause to the crisis may very well be the federal government. In an effort to stop "redlining" which prevented some people from qualifying for loans the government made banks loosen their standards and get rid of some underwriting practices in an effort to eliminate discrimination.
They triumphed it as an effort for everyone to achieve the American dream. However, IMO not everyone is qualified for the "American Dream" (if this is defined as owning a home). Some people aren't qualified for a $2,000 credit card or even a $100/mo cell phone. They go crazy with it and do things that are not financially responsible. Well if this is the case, why should these people qualify for a home that is way more expensive and much harder to get rid of??
So in an effort for the government to say that they "solved a problem" they really created a much larger problem. Now that isn't to say that some lenders didn't take full advantage of the rules and put some people in some bad loans but it is not just the banks fault.
It really bothers me the rap that banks and lenders are getting while the Feds are getting off scotch free. I think that the Feds are equally responsible (if not more responsible) with lenders, realtors, and the borrowers in this whole mess.
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