Reply #16: A mind of it's own [View All]

[ovidsen]

The national economy, and the world economy for that matter, is a beast with a mind of it's own. There's always someoneone out there with the perfect plan for lining their pockets by intentionally bankrupting other people and organizations. The unknown unknowns will get you every time. Sure, subprime mortgages seemed like a good idea at the time (no money down? adjustible interest rates?) but greedy and heartless brokers talked families into homes they couldn't afford in the first place, and as the economy chills, the fallout increases.

Whoever came up with the no money down, adjustible rate mortage idea was a greedy idiot, and federal regulators should have seen the monster that was being created. When my wife and I bought our condo several years ago, we did it the old fashioned way. 20% down (yes, it was a bitch to save that much) and a 30 year fixed rate. No matter what, I'll always know how much I owe every month, and even in today's flat market, we have enough equity to sell it for less than we bought it and still have money in our pockets. Not that we intend to do that.

There are so many variables at work here that even gurus like Alan Greenspan admit that managing the economy is like trying to control smoke. And deregulation has led to lending practices that are downright predatory. Here in Georgia, outfits like TitleMax will lend you money at 30% interest with your car title as collateral. If you miss a payment, they take your car. Even if you only owe $1000 and your car's worth $10,000, you lose your car. No refund of the difference between the car's worth and the money you owe. That's a license to steal from the working class. Georgia lawmakers considered a bill to curb this practice earlier this year, but the predators basically bought them out, and the Titlemaxes in Georgia are thriving.

The interest rates on unsecured loans, like credit cards, are also out of control. How banks can charge 28% interest on the balance due when the inflation rate (consumer price index) is running at under 3% is indefensible. I used to be a champion of a loosely regulated free market and subscribed to an Adam Smith kind of philosophy which belives that ultimately, markets can control themselves. Not any more. The New York Times said recently that some hedge fund managers make $20,000 a WEEK. Nobody needs that much money. Big banks, possibly trying to top the greed of storefront usury houses like Titlemax are cleaning up with high interest loans to people who work hard, fork over their taxes, and pay their bills on time. This is infefensible.

I don't think the upheaval the OP is predicting will happen this week. But there will be a corection soon. The playing field will be levelled. Re-regulation is badly needed and I hope Democrats rise to the challenge. Heads will roll and working Americans will again pay a fair price for services offered by banks and brokerage houses. It's a matter of when, not if.