The Ownership society
“Driven largely by the surge in foreclosures and an unsettled housing market, Americans are renting apartments and houses at the highest level since President Bush started a campaign to expand homeownership in 2002.”
The shift “has largely derailed what Mr. Bush called ‘the ownership society,’ his campaign to give millions of people — particularly minority and lower-income families — a shot at homeownership by encouraging lenders to finance more home purchases. . . .
It’s funny, big corporations have this same theory I think. You know??? that mantra that if the employees own a piece of the company they will treat it like their own. Wal-Mart was really big on that I think…
Trickle down theory…just wait a few more years folks, I’m sure I’m gettin mines any day now!
Pfft. Bush’s “Ownership Society” was just another in his long line of oxymoronic programs. Remember “Healthy Forests,” wherein we saved the forests by cutting the trees down; and “Clean Skies,” wherein we cut regulations on polluters so that they could pollute more.
Well, Bush’s “Ownership Society” was never meant to increase home ownership in America. It was meant to increase the ownership of us. We live paycheck to paycheck, unable to save due to rising prices on everything, and without property to call our own.
The “Ownership Society” was intended to make us all slaves, or at least indentured servants. We are the owned.
are you sure? I thought those things were usually spot on with the message behind the words
Now wait, I know I have been missing for a couple or four months, but how can there be two hottest bloggers in Delaware? I knew Donviti to be TEH hottest blogger in Delaware, and now there is this pseudonym “Delaware’s Hottest Blogger.” Did Donviti finally clone himself?
He’s gone Supernova on us and is spreading through the Blogosphere!
😀
Yeah, because it’s the government’s fault that people got in over their heads.
When will we finally start to live in a Take Ownership Society?
When we have a government that protects people rather than helping business prey on them.
Dom just got pwned!
What about people protecting themselves? Why is it the government’s responsibility to hold everyone’s hand and make sure they don’t make stupid decisions? How much government involvement do you want in your life?
The mortgage industry is probably one of the most heavily regulated in the country. If you’re a homeowner, you should know that. Remember the 40,000 forms you had to sign in triplicate when you bought your house? That was the government trying to make sure you knew what you were getting into. They require lenders to disclose EVERYTHING.
Delaware is an attorney state, meaning that borrowers must be represented by an attorney for all real estate closings (as opposed to MD, NJ and PA). In addition to the stack of forms the borrower signs during the application process, the attorney explains every form being signed at closing. So now the borrower has had the product explained by the loan officer, the lender has mailed a disclosure package (in case the loan officer didn’t explain it properly), AND the attorney has reviewed the loan terms. That doesn’t even include the fact that they’re perfectly capable of doing their own due diligence and independently researching how the loan product works.
Are there shady loan officers? Sure. However, borrowers have more than enough opportunity to become informed and change their mind if necessary. The problem isn’t the lenders or the mortgage products; it’s that everyone’s eyes are too big for their bank accounts.
Dom you are very energetic but unschooled in economics. And I’m afraid you drank too much of that credit industry Kool-Aid.
The problem isn’t the lenders or the mortgage products; it’s that everyone’s eyes are too big for their bank accounts.
There’s a reason for that, and yes it is Bush’s fault and not the homebuyers.
Ever since WWII people have bought houses on the very realistic expectation of a rising income, and rising housing values. It was always good advice for young people to stretch to buy as much house as they could possibly afford, and then a little bit more. Because your income would catch up soon enough.
But Bush put the brakes on all that and turned the dream around.
This isn’t just about people’s personal home-buying decision. The process of buying a little past your income drove the growth of the whole economy. Your theory of everybody cutting back their standard of living is economic suicide.
If everyone bought no more house than they could afford at the time they bought it, we would all be living in shoeboxes and the housing industry would begin a death spiral.
Which is kind of what is happening now.
Also Dom, where is the lender’s responsibility? They made the “high risk” loans. They approved the transaction and held the power of yea or nay in their hands.
There’s plenty of blame to go around. Placing all of it on the borrower isn’t fair.
Donhoni watcha gonna dew wit youin trickle down drops?
The entire real estate industry is an econonic prison…the new style poor house to which we willing go. Practice saying: “Sir, may I more (porridge)? Please Sir?
The thing is that he forgot to tell us that we were chattel to be owned in the ownership society…. shame really, we could have forged our own shackels….
Thankfully, George W. Bush will be history in few short months, it`s more important to examine the housing crisis and place the blame where it really belongs, on the conservitive idea that less regulation in the financial sector is a good thing. Allowing these sub-prime morgages to be sold by the original lender and packaged in derivitives and sold as triple A securities had the effect of releasing the originators of any risk whatsoever. So mr. and mrs jones were told that interest rates would never go up and home values would always skyrocket. boy less regulation is really swell.
anon,
you said Ever since WWII people have bought houses on the very realistic expectation of a rising income,
you mean trickle down economics….it works…don’t bash it
P – The lenders are paying in the form of multi-billion dollar writedowns for their decision to approve high risk loans. They took a risk, just like the homeowners did. I’m not saying the lenders are completely without fault, I’m just saying that I’m sick of hearing blame put on everyone but the consumer.
‘It was always good advice for young people to stretch to buy as much house as they could possibly afford, and then a little bit more.’
The problem is that they weren’t settling for what they could afford and a little bit more. They were going way beyond that. They were buying houses based on the fact that they could afford the interest-only ARM payment and banking on the value going up enough to refinance once the fixed-rate period was finished. The problem came when home values started to drop.
There were definitely mortgage brokers who misled people into choosing products that probably weren’t in their best interest (pun intended), but please refer to my previous comments about the borrower’s opportunity to independently research and change their mind. These people weren’t duped – they opted for the lower-rate ARM when the higher-rate 30-year fixed with a fully-amortized payment was available. They took a gamble and they lost. That sometimes happens with investments. I’m sorry, but it’s not the government’s responsibility to keep citizens from making bad investment decisions.
dom,
grow the fuck up will you? Christ, you are trying to tell me that the banks are innocent in this and had nothing to do with the run up on prices and “easy” money?
Please, sure there are idiots Dom, but half the population in this country isn’t as smart as the other half. So sometimes maybe, JUST MAYBE some people (the other half) get taken advantage of.
How about the military having foreclosure rates 4x’s higher the national average? They weren’t taken advantage of? Lenders can go online and find out what all military personnel make, but yet those guys are getting foreclosed on that much higher?
christ almighty. Do you blame rape victims for dressing slutty too?
DHB – Learn to fucking read, will you? Start with my first paragraph and then move to the first sentence of my fourth paragraph. I’m saying there’s blame all around.
I’m curious – what do you think the government should have done differently that would have prevent this from happening?
what do you think the government should have done differently that would have prevent this from happening?
Revoke this:
http://en.wikipedia.org/wiki/Garn-St_Germain_Depository_Institutions_Act
It was all part of Ronald Reagan’s wonderful deregulation, which brought us the S&L bailout and now the mortgage bubble. Ain’t personal responsibility grand?
You might also ask Mike Castle – he sits on the House Financial Services Committee, which contrary to your opinion IS actually a Government agency charged with overseeing mortgage markets, and keeping financial markets (such as mortgages, credit cards, etc) from becoming a threat to the economy or to individuals.
Yeah, anon, let’s go back to the pre-Reagan years when you couldn’t buy a house unless you had a 20% down payment. That was great for minorities and young people.
The HFSC is charged with overseeing mortgage markets, not product development. Can you imagine the outcry if the government had stepped in and removed Option ARMS (the so-called ‘exotic mortgages’) from the market? There were hundreds of thousands of people (including myself) who used those products properly and it worked to their advantage. Are you suggesting that the government should have deprived everyone of a certain product to protect a small minority from their own ignorance? I would rather see my government investing their resources in something that a little more worthwhile like, say, education.
There were hundreds of thousands of people (including myself) who used those products properly and it worked to their advantage.
But if the ARMs crash the economy, their so-called “advantage” is a Pyrrhic victory.
ARMs have nothing to do with lower down payments. The new lower down payments are created by the securitization and derivative products created on the back end of the mortgages. The deregulation behind that is a whole different bucket of blame.
The HFSC is charged with overseeing mortgage markets, not product development.
This is a non sequitur and completely circular. Financial markets are composed of financial products. HFSC is one of many watchdogs, and is specifically charged with preventing meltdowns like the current one. Mike Castle was snoozing througout the crisis.
So far you are danicing around the central issue which is this: The banks did not take responsibility for loaning money to high risk creditors, they asked the government to bail them out. So why the hell should the consumer bear the brunt of bad investment decisions by corporations, or do they not need to be responsible while the rest of us do? I see they set the rules we must follow, but they must not be held accountable if those rules are tilted in their favor and they make a mistake. If I make a mistake it is my fault, if the banks make a mistake it is the government’s jobs to protect their assets? That is the logic that was used. And that is the central issue, blame the people for making bad choices when their only options are bad or worse choices. But never under any circumstances blame the banks for bad decision making or usury or using deregulation in irresponsible ways…. that is faulty logic in a society that says there is equality before the law.
Good God. Dominique is the only sane person on this blog. Nobody forced anyone to buy a 4,000 sq ft house for a song, hoping they would make enough money down the road to pay the mortgage.
Before, the hand wringing was because housing prices were going up, up, up and no one could afford the prices. And that was the greedy bankers’ fault. Now, the prices have come down and it’s still the greedy bankers’ fault. Sorry, but until it becomes mandatory that people buy a house far in excess of their income or worth, it’s nobody’s fault but the buyer’s.
And guess what? With the bust in the housing bubble comes new opportunities for people with smaller, less expensive houses. But I guess that must be bad, too, unless the government makes sure everybody everywhere can make their house payments.
Guess what – our economy is built on credit.
I don’t just mean “people buy lots of stuff on credit.”
I mean credit – the promise to pay – is what gives value to our currency. We cannot issue new currency without new debt.
There is nothing wrong with debt-backed currency as long as the system is managed intelligently.
But if the promise to pay is not credible, our currency loses value and our economy cannot grow, and our standard of living begins to shrink.
Our laws must protect the integrity of our credit markets to preserve the value of our currency and thus our whole economy and standard of living.
Government is responsible for the integrity of our currency. That is why Government must oversee and regulate credit markets, including banning risky practices when necessary.
“Yeah, anon, let’s go back to the pre-Reagan years when you couldn’t buy a house unless you had a 20% down payment.”
I’m just waiting for one of those racist mortgage lenders who wouldn’t give home loans to blacks to tell a congressional subcommittee, “I told you so.”
No, I’m not just generalizing here; the Baltimore Sun’s “real estate wonk,” Jamie Smith Hopkins writes that fully 65% of subprime foreclosures in MD are for black households, primarily in the Baltimore metro area. I’m assuming we have the same numbers for Wilmington?
And what’s Obama’s solution, bringing back the projects?
That is why Government must oversee and regulate credit markets, including banning risky practices when necessary.
Try telling that to Tom Carper.
GREX –
A 20% equity threshold to buy a house is hardly racist. It might be classist, but class mobility has GONE DOWN since we decided that there were no rules constraining banks and other lenders.
fully 65% of subprime foreclosures in MD are for black households, primarily in the Baltimore metro area.
So much for the “Nobody forced anyone to buy a 4,000 sq ft house for a song” theory.
Oh, and for the record, I’m in favor of more stringent regulation of mortgage backed securities – the financial instruments that encouraged mortgage lenders to take on so much risk in the first place. I’m more familiar with the rules on margin requirements for brokerage accounts and such, but I’m guessing there’s some similar way to tell the sector, “We let you go unregulated, and you f@#ked it up! No more mister nice Fed.”
Jamie Smith Hopkins writes that fully 65% of subprime foreclosures in MD are for black households
Do you have a link to this? I read her blog pretty regularly and don’t remember this entry.
Cass, I think it was back in March – I’d heard the story on 98 Rock (the usual “women and minorities worst hit” storyline.) and looked it up online as soon as I got to work, but at this point I’m not particularly inclined to pay for the archive.
The SEC should have stopped this Ponzie scheme in it`s tracks. The conversion into derivitives made it work. However shortly after 9/11 Bush took 55% of the SEC staff and made them homeland security, and has slashed funding to those that are left in every budget since. But please remember one thing, this is something out of every conservatives` playbook, so long after Bush and cheney are gone they aill still be trying to convince the masses that Deregulation helps the free market. It only helps create Enrons, world comms and subprime meltdowns.
‘The banks did not take responsibility for loaning money to high risk creditors, they asked the government to bail them out.’
Which banks asked the government to bail them out? As far as I know, Bear Stearns is the only company that asked for government assistance and that came in the form of a short-term loan from the Federal Reserve. They were subsequently purchased by JP Morgan for a fraction of their stock price. That purchase was also subsidized by a loan from the Federal Reserve. Bear Stearns is (was) and investment firm that purchased mortgage-backed securities. The individual mortgage companies (Citi, Chase, Wells, etc.) took major write-downs with no government assistance that I know of. They paid a very dear price for their gamble on high-risk loans as should investors who took the same gamble.
anon – I didn’t say that ARMs created low down payments. In addition to securitization, competition created low down payments and without deregulation there could be no competition.
ARMs didn’t crash the economy. Several things crashed the economy, including the war and the cost of oil. ARMs didn’t even create the slowdown in the real estate market. We’ve seen ridiculous appreciation rates over the past 5-7 years. We are simply experiencing a long-overdue market correction. Of course, it’s America, so we have to find someone to blame for every calamity, so let’s blame the banks or even the mortgage product. Sheesh. How ’bout sometimes shit just happens and it’s not the fault of one particular person or entity.
Sharon – Thank you for the breath of fresh air. 🙂
Dominique,
Economics has laws like any other system. There is never just a question of shit just happens, the question to ask in all things is qui bono “who benefits.” I don’t have time right now to go through the entire bailout process but suggest you google it, and look at the terms of the fed’s “loan” to keep bear and stearns afloat as well as the enocurgament of both 1. foreign investment and 2. a sizeable government bail out.
Shit like we have seen never just happens, it is the result of economic laws that can be exercised for or against the public welfare. You are assuming that we are operating under a free market economy where basically there is a level playing field. That is not the case.
competition created low down payments and without deregulation there could be no competition.
Competition? What competition? The banks got busy merging and consolidating so they won’t have to compete with each other.
The only real competition was among mortgage originators, who bore no risk and got out quick.
The low down payments emerged because banks wanted to tap the previously untouchable sub-prime market and they had good reason to think if the loans went bad, government would not allow the bank to fail. The government regulators gave them a wink and looked the other way. That allowed the banks to adjust their risk parameters downward, on the taxpayers dime.
You guys are talking as if it`s all over the crisis has passed, it`s only just starting The amount off writeoffs yet to come maybe in the trillions ., only a small percentage of arms have reset and housing prices are still falling. A rash of bank failures is still very possible. Just friday moody`s downgreaded the four largest mortage insures, including MBIA and ambec, A financial meltdown is still possible.
‘Competition? What competition? The banks got busy merging and consolidating so they won’t have to compete with each other. ‘
You’re just being silly now. The major banks may have done a lot of merging, but, prior to the meltdown, there were dozens and dozens of small mortgage lenders competing for a piece of the pie.
‘The low down payments emerged because banks wanted to tap the previously untouchable sub-prime market…’
I’m not sure I understand what you mean. The vast majority of low down payment loans are A-paper, conventional loans, not sub-prime.
Dominique,
The bailing out of banks is only a single part of a much larger probelm in the macroeconomic structure and much of it has to do with the way we are doing business right now. I want you to spend some time looking at this from a different perspective even if we disagree on the fundementals, there is a disparity between the way you are thinking about the issue and the way it has unfolded. Ray K and Anon are both correct in their assessmentbut they still do not go far enough, what we see is that since Greenspan we have had the creation of bubbles of speculative or derivative markets. these types of speculation are not traditional hedge fund speculation they are far more destructive to the economic superstructure. a derivities bubble turns toxic and melts down other aspects of the overall system, this in conjunction with the fed’s response of printing more dollars and lowering the value of the currency always, always cause serious structural issues. That as far as I can tell have not been addressed, so now the market has moved with government money that benefited the banks and wall street from investment in housing derivatives to investment in necessary commodity derivatives driving up the price of basic commodites and increasing inflation during a deflationary cycle. It is a profoundly dangerous situation and Ray is right, iw could cause a meltdown but that like other meltdowns will take some time show its full effects. But I see it already, you can see in consumer confidence indices, in durable goods sales, in retirement and pension funds. And when the pension fund bubble blows, I have no idea what the older people who have invested in the system and have faith that it is being managed appropriately are going to do! I mean will they go back to work? Will we let them live with their kids? I am not sure. But I am sure that the overall effect is being felt in local economies and is trickling up into the overall health of the global economy in much the same way that financial meltdown in Argentina created instability becuase of a perversion of or corporate managed capital and NOT using a free market capitslist system. We are not using the free markets, or the global and cooperative markets in ways that lead to long term stability. I am sure the results will not be pleasent, I just cannot tell you how bad it is going to get, becuase a lot of that depends on whether the democrats have the courage to intercede, estabilsh a way for people to access credit again, and to protect the rights of consumers and create a level playing field. So either we do or we do not create the terrible imbalances of rich and poor that you find in India or Chile, or Peru or Colombia or Mexico or Africa.
Once we reach that point all that silliness of worrying about little issues is going to seem like nothing compared to the need for access to credit and healthcare for elders and for the majority no credit and limitations on credit by the elite whose interests are not oriented towards competition but towards control of markets in areas other than America. I know it may sound grim and it is and again I think the Democrats have the best chance of anybody to correct the siutation.
Brian –
I don’t disagree with any of your points, though I would argue that most of the economic reporting – durable goods, job starts, unemployment, GDP, CPI, etc. – have seen downward trends, but they’re nowhere near Chicken Little status. In fact, I would argue that, given the constant chatter about the terrible state of the economy, those economic indicators have held up pretty well.
The media is not helping matters much when they constantly report the real estate market and the economy are in the shitter. It is perhaps the most irresponsible journalism I’ve seen since the election of GWB and the build-up to the war. Real estate is local and they know it. There are pockets of the country (Florida, Michigan, California) that are experiencing hideous drops in value; however, Delaware has been holding its own for the most part. Unfortunately, when you can’t turn on the freaking TV without hearing blanket statements about it being the worst time to buy a house (never mind that a slow market is the BEST time to buy a house), it kind of becomes a self-fulfilling prophecy. It’s the same thing with the economy. Much of market movement (be it real estate or stocks) is psychology-based. Take, for instance, the impact a jobs report has on the market. If the estimate is 80,000 new jobs and the report comes in at 100,000, the stock market soars and the bond market tanks without any thought to what kind of jobs were created. They could all be fast food jobs for all they know, but it doesn’t matter – it’s all about the psychology behind the number. So, when news reports constantly predict a horrible recession and inflation, traders start to sell and people tend to slow their spending – again, self-fulfilling prophecy.
I’m not saying that they need to sugarcoat the state of the economy; I’m just saying they don’t need to sensationalize it as much as they do. I don’t mean to oversimplify it, but I think a little bit of positivity in the media would go a long way in terms of turning things around or at least keeping the economy from hitting rock bottom.
Going back to the original point, I agree that the banks have had a hand in what’s happening in the mortgage industry; however, I put a significant portion of the blame on the consumer as well.
BTW, I think counting on the Democrats to have the courage to do anything beyond wringing their hands may be a bit overly optimistic.