A major reason for the collapse of the "Bailout Bill" was anger on Main Street that the bailout was really just about helping Wall Street. Why should the average taxpayer help the fat cats?
And, in the ongoing discussion about what remedies to consider right now, there is another, albeit less-articulated anger: the anger of those homeowners who are not in trouble with their loans and who resent subsidizing overreaching homebuyers who bought and borrowed over their head.
As to the anger toward Wall Street, I certainly understand it. As to anger toward those who are in housing trouble, I have a different point of view.
The story of the housing crisis is one of major forces and institutions in our country pushing people to buy. Presidents Clinton and Bush made homeownership levels important points in their agenda. Alan Greenspan kept interest rates inexplicably low while he looked the other way (if he looked at all) at increasing signs of reckless lending. Real estate agents, led by their cheerleader the National Association of Realtors, did everything in their power to get people to buy (the more expensive the better). Mortgage brokers, basically unregulated, convinced people to take loans that were the financial equivalent of wolves in sheep's clothing.
The financial press loved the idea of homebuying as a story line for responsible investing. And, oh yes, the largest advertiser in print media? Real estate agents.
Lenders - both banks and non-banks - lost any connection with borrowers let alone the idea of loan repayment, and competed to offer mortgages that were ingeniously crafted (by the best marketing minds in the country) to induce people to borrow lots of money.
In other words, the game was rigged against the individual or family who just wanted a piece of the American dream. Yes, there was some greed and speculation - but those buyers, flippers and the like, are long gone. What we are struggling with today are those who bought not a house but a home - hoping to create a better life for themselves and their families.
There should be no anger toward those who are trying to stay in their homes and looking for government or legal assistance. While perhaps naïve and overly trusting, these people were up against forces far more powerful than they were. Forces that were in great favor so long as home prices kept rising and everyone was making money. But then, as prices started to drop, the storm turned ugly, Katrina-like, and is pushing people out of their homes. Unlike Katrina, however, this storm was man-made and we all need to face up to our societal responsibility to help those who got caught in the winds.
Jim Randel. Randel is the author of the just-released book, The Skinny on the Housing Crisis (Clover Leaf, 2008).
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