The Housing Crisis in a Nutshell
Two recent reports on the NewsHour with Jim Lehrer combine to explain a big part of our current economic crisis, especially as is pertains to housing, and it boils down to this:
1. Wall Street supported a major industry of financing risky house mortgages because it believed that housing prices would always rise and thereby cut the losses for bad loans.
No/low down-payment loans to people with risky credit were common. Flimsy credit checks were built into the system. Everyone in the industry made money by selling, not by denying a sale. (Paul Muolo)
2. Middle class people have been basing their economic security largely on the principle that their rising house value represents their savings.
More than enough credit was readily available. They absorbed the message that spending is good for the economy. They have no restraints on impulsivity since the ability to spend from the privacy of their home exists 24/7. (Stuart Vyse)
So it looks like the greed underlying our economic woes is pandemic – or endemic – or systemic… however you want to describe it.
It just goes to show, though, that “honesty” is not the only important virtue needed when it comes to how we manage our money and other resources.
