BR – Before Reagan
Before Reagan there were all kinds of pesky rules around that said things like: banks are banks; insurance companies are insurance companies; stock brokerages are stock brokerages. Obviously such restrictive rules prevented American business from prospering, so they were done away with and with a general “who cares” attitude about regulations we saw wonders like the Resolution Trust bailout of savings & loans, the Enron accounting frauds [with multiple clones], and all kinds of good things like soaring salaries for CEOs and outsourcing for the rank and file after the pension fund was looted.
Atrios and Whig provide some basic background of what’s going on, and R. Neal covers the impact on the South.
We have a two-for, a liquidity crunch [there’s not enough money to buy anything] and a credit crunch [the lack of money, means there’s none to lend]. The money has been soaked up by the sub-prime mortgage market, the multiple types of paper that have been generated to support it, and the rising interest rates that are wiping out the ability to pay those mortgages.
The money was supposed to be coming from people paying their mortgages or from the sale of the properties if they defaulted. The problem is that the rate increases mean that people can no longer afford to pay the mortgages, and a glut on the housing market means that the properties have lost significant value, and no one wants to buy them.
In the days of BR, you needed a good credit history, a good income, a down payment, and were investigated before a mortgage was granted. A year ago you got calls at dinner asking you if you wanted a no down payment mortgage that covered 100% of the purchase price. It was as easy to get a mortgage as a credit card.
This was not a good idea. Currently people are seeing why that was a very bad idea. A lot of people are in very serious financial straits because of this bad idea, and at any time I expect to see Resolution Trust II to help out the mortgage industry while the newly homeless seek a better grade of cardboard box.
Remember: it’s not welfare if it goes to a multi-national corporation.
4 comments
How’s Neil Bush doing?
neil has a new cash cow.
a year ago? i think they’re still in denial. i’m still getting those suppertime phone calls, telling me i’m eligible for a generous eloc. i’ve never in my life owned my own home.
Neil Bush had better never let it be known that he is anywhere in my area as I have two friends who lost everything in the collapse of the Silverado S&L. They have come back, but can never think of retiring because of that. The thing most people miss about the deposit insurance is that it only covered $100K. That may seem like a lot, but when you have built up a few million and were committed to project that needed all of it, you end up in bankruptcy.
Just like they always did for the Shrubbery, the Bush Family found a position for Neil.
Of course, before Silverado Neil dropped $28million of SBA loans in an oil shale venture. The whole crew belongs in prison.