Because We Can

"Because you can" is a poor reason
by Robert Ronald Smith
How foolish we can be when life seems easy. For some 20 years, I've watching friends and neighbors acting foolishly, feasting on the liberal mortgage market and a home market that seemed forever escalating in value. Easy credit and a housing-value bubble seemed to go on forever, sucking in more and more people who seemed to assume that the "boom" would last forever. Many are now faced with grim outlooks... homes that are decreasing in value while mortgages and income to pay them are not.
Many simply overextended themselves by any standards, because easy mortgage credit made it possible. I was fortunate to bail out of home ownership before the nosedive. I made personal choices that decreased my income severely, and sold my house, at a profit, and under threat of foreclosure. Probably dumb luck, but 20 years ago, after a costly divorce, I had such bad credit that I never expected to own another house anyway. Bailing out of a pension is all that made it possible.
By the time I sold, the "bubble" was still inflated, my children were grown and I no longer had need of all the space. Despite bad credit and a foreclosure in progress, I still could have refinanced to keep the house. That astonished me. I told a mortgage rep that "I wouldn't loan money to me"... but, mortgage companies would. I had enough sense to decline. Many others did not. A significant number of people are now forced to simply walk away from their homes, leaving them to the holder of their mortgage... because their mortgage(s) are higher than the deflated value of their home.
For most of my life, it just wasn't possible to get into such trouble. Credit was sensibly tight. The first house I bought was with zero down payment, but only because it was under the GI Bill. At the time, that was the only way to buy without a substantial down payment. People used to save for many, many years to accumulate a down payment. My parents didn't own a home until my father was past the age of 60.
Since then, expectations of young people have skyrocketed, and home ownership has seemed available almost from the time they began earning an income, and so many simply dove into debt.
What changed? People loaning money didn't just get stupid. They were pushed and prodded, and lured, by government, into loosening credit and taking on riskier borrowers. Politicians, perhaps actually believing the farce that they could "control" our economy, encouraged bad risk and even lured lenders by buying mortgage debts and forcing interest rates down at the same time they were deflating the value of the dollar. Politicians campaigned against what they called "discriminatory lending" (which was actually common-sense risk assessment), demanding that lenders lower their standards and lend to prospects they would have once justifiably rejected. That pressure lured in lenders and borrowers alike... it set aside financially reasonable evaluation. Easy credit did create a housing boom, but, in so doing, it may have set up our economy for serious destruction.
The housing boom (bubble is more accurate) pulled in untold new developers and contractors to supply the houses for all the new buyers. Shoddy contractors found a ready and gullible market of younger and trusting buyers. Realty firms grew far larger to handle all the buying and selling(churning) that accompanied rapidly-escalating home prices. Remodeling even relatively new homes using 2nd mortgage money became common, giving rise to big-box do-it-yourself stores.
Government, meanwhile, became accustomed to being involved in housing matters, and cities began facilitating developments themselves, through TIFF financing, taking older homes and businesses via eminent domain, and pushing new and expensive housing construction. Along with their push for newer housing, cities made building codes more restrictive and expensive to follow, again helping to handicap older homes to the advantage of newer ones.
All of this government interference raised the cost of everything involved in home construction and maintenance. Taxes climbed, maintenance costs climbed, insurance costs climbed. Licensing of all kinds of contractors reduced competition, which raised prices.
Who is suffering as a result of all this government tinkering of housing? The answer to that is obvious... the poorest of those who got sucked into the housing bubble... the very ones government was pretending to give advantage to. I use the word "pretending" with intent, because any objective observer during this period of time knew what the downside to all that intervention had to be. Any politician who didn't know should never have had the power to interfere. Either we're electing people with no financial sense at all, or we're electing people who have their own ways of profiting from the inevitable suffering of the casualties of a government-induced catastrophe.
Government power always has destructive results, which is why libertarians push so hard for the reduction of government power. Government had no business interfering in the mortgage or building industries, and they have taken what was once a sensible part of our lives and turned it into a financial trap for the unsuspecting.
Now they're tinkering more, in a feeble attempt to help some of those they've destroyed. We should all know that those new "efforts" are political in nature too, and will only make the damage worse. Nothing works like the free market. No individual or company, without the influence of government, would have written the mortgages that are failing now. Most of those people now losing their homes wouldn't have been able to finance them, and wouldn't have been sucked into a busted housing bubble.
Only government can create catastrophes of such proportions. Government officials refuse to accept the title of this article. They believe that because they can do something that will sound good and even benefit some people, that they should do it.
They are notorious for not looking into the future, because they know they will not be held accountable for future results, nor will the future losses affect them personally. Their natural tendency is to do whatever will please voters or contributors in the short run, at the expense of everyone else in the long run.
Politicians, of both major parties, have screwed our economy almost beyond recognition. What was an exciting, vibrant, and rapidly-expanding economy has turned so sour that it's in danger of causing recession around the globe. Despite that, Americans will no doubt go to the polls in November and return precisely more of the same into office. We do have a choice, but in order to choose it, we will all have to ignore all the money being spent to lure us once more into self-destruction.


Viva Liberty!