Finance

Even more than a year later there is still a blame game going on in regards to the financial crisis; Americans are still left with the impression that the housing market issues were caused by loose financial practices and people trying to live beyond their means. People still feel that the housing bail outs were wrong or given to the wrong people, those who attempted to buy so called Mc-mansions rather than those just trying to own a modest home. And Oprah’s favorite financial guru was back to screaming at the American people and how we did this to ourselves, this time because people lacked the emergency savings. Yet she admitted in explaining how we got here that these adjustable rate mortgages were bought and traded on the stock market without the “experts” doing it knowing what would happen. The financial guru also seemed to be wagging her finger at those who purchased adjustable rate mortgages, as if the public was somehow supposed to be clairvoyant and know they were getting into something bad.

The reality is too many of the sub prime, adjustable rate mortgages where given to people attempting to buy a modest home with enough room for the occupants; at worst it was people in New England who bought old Victorian style homes because that’s what is available in the area. Despite the finger pointing and the scolding being handed out to the American people by the financial expert, these type of mortgages were, and are still not, illegal; somehow they conveniently forgot to mention that people were given a sales pitch not the true facts of this kind of mortgage. It’s not that people didn’t do their research or know how much they could afford, it’s that when they got there they were told yes you can afford that- here’s how and they were presented with, not a scam, but a legitimate alternative mortgage option. That is how people got sucked in to buying so called Mc-mansions, not greed, materialism or irresponsibility. Problems arose not only when the scale of potential adjustment was downplayed to get buyers to sign on the dotted line, but then the lenders put them into the stock market to be bought and traded. Months after the financial melt down had us all in its grip, news outlets reported one of the giant mortgage lenders was falsifying bank statements and employment records for people who wouldn’t otherwise qualify for a loan. All of this lost on the one speaking from her financial pulpit.

Further, these are not local banks, these are not financial institutions no one has ever heard of; these were and are the biggest names in the business. Plus, thousands lost their homes when they lost their jobs and financial powerhouses across the board, including this one, can talk all they want about money saved for a rainy, day having an emergency fund, yet even if you had the revised 6-8 months, even a years emergency fund for all expenses that does nothing for you or your family if it takes longer than that to get another job. Such was the case of one woman and her family featured on a subsequent Oprah show who had been looking for over 2 years when she finally landed a position. Ben Stein was on a Dr. Phil show discussing the same topic telling a former white collar worker to get a job at Starbucks or sacking groceries, something to be employed and stem the financial bleeding; too bad that most employers will look at his employment history, his pervious salary, his former field, think what are you applying here for and throw it in the trash without a second thought. Again things missed by financial advisers when instructing the public.

Likewise you can’t in good conscience tell people who are living pay check to paycheck providing basic needs, not being extravagant or wasteful they should save money and have an emergency fund when they are barely making ends meet, when there is nothing left to put into one. People who may have 2 cars because both parents work, possibly at different times to avoid paying childcare or simply due to the fact that that job, with those hours is the one they could get and another car is how they get to work. You also can’t tell persons with a mortgage some have had for 10-12 years they are somehow derelict when it adjusts and the payment doesn’t double or triple it quadruples, something no one could foresee and they suddenly can’t pay. Financial geniuses all can rant about people trying to buy a home that really can’t afford it; however, that claim really doesn’t hold water when the mortgage payment is as much, or even less than they would be paying to rent. Renters were not exempt for this either because as the property owners were foreclosed upon, renters were evicted in spite of paying their rent on time and doing everything right. If you were one of these unfortunate souls negotiation and some other incomprehensible maneuvering was your only option.

It was the same message on the subject of credit cards, how sick this guru was of seeing people in line buying all kinds of Halloween things for their kids; the concept of I have to give my kids a good Halloween and the gurus response: but are you paying off your credit card at the end of the month? The expert treating all of America like spoiled children once again, yet as time progressed even they would tell people not to pay off their credit card, not to leave it inactive as it could damage their credit rating, possibly have an effect on the interest or payments of a fixed 30year mortgage. And par for the course, nothing said about the credit card companies who were slashing the credit limits and raising the interest rates of those who had never been late with a payment, other than to check with the company before spending. Why, because many of the major card companies were doing this without notice. Next, when the government finally passed legislation to regulate credit cards, to virtually put in place the common sense things many already thought they had, such as no hike in interest rate without reason, requiring notice of rate hike or credit limit changes, the companies rolled out hidden fees to gouge customers before the law went into effect.

As we started to see a glimmer of recovery, Oprah’s favorite guru had more advice for struggling American’s trying to keep their heads above water; live on half, half your income that is. People barely getting by told to live on half, people still reeling from the ups and downs of the stock market told to live on half. One can only expect such a head turner from someone who in a Today Show segment a few years before encouraged a young woman to take on a roommate in the days before home sharing and house swapping, more importantly, before their were screening agencies to weed out potentially dangerous individuals. Once more it’s a case of that only works if you have an income, if you have found a job; at the same time, you cannot live on half when the whole of your income doesn’t cover basic expenses. The latter now a fact of life for people who may have managed to get a job but they went from their high paying, 20 years seniority, white collar or in demand job to sacking groceries for $7.00 an hour; for these people living on half is not an option.

Equally disturbing is the message being given to the ones whose college and retirement funds took a hit because of what happened on Wall Street; it’s all because people tried to live beyond their means, potential home owners wanted something they couldn’t pay for. And over a year later, the only thing being said about financial institutions is they were lending to people they should not have been, to people who had no way to pay it back. Nothing at all said about shyster practices of falsifying records, the ridiculously risky behavior of buying, selling and trading adjustable rate mortgages on the stock market. People with credit card problems are the ones who were using credit improperly and irresponsibly, forget those who had budgeted to pay off the balance in six months not one, forget those who were going along fine until they lost their job after 15-20 years.

Consequently, due to this “we/they did it to themselves” perception, there has been no discussion on Capital Hill, or anywhere else, about possibly outlawing the adjustable rate mortgage that caused all the problems. While there is talk from lawmakers about regulating how big, big banks can get, there is no conversation about solutions such as making real-estate buyers purchasing residential real-estate for the purpose of renting it to tenants ineligible for an adjustable rate loan, in order to protect renters who suddenly found themselves evicted. At the same time making the buyers of commercial real-estate ineligible for such loans so that businesses leasing the space do not disappear when the owner defaults on the loan and the business has no space to operate. If not taking those steps, then at the very least prohibiting the buy, sell and trade of adjustable rate mortgages on the stock market, so that home buyers aren’t struggling to make payments on something that is now worth less than what they bought it for, so that the, so called, adjustment doesn’t triple and quadruple payments due. And unfortunately, because none of this is taking place it could happen again in 20-30 years when the economy has long since recovered and the shock worn off.

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