Milestones: October 1, 2008

(by Miles Barber - October 01, 2008)
By Miles H Barber
    Consider the controversy causing the credit crisis and cash crunch and you can be confident that more casualties will be counted.
    Of course no politician is to blame.
    That’s what fingers are for, to point out those responsible.
    Certainly not those really responsible will be held accountable.
    It was Congress who began this process in 2002.
    During this period Congress set the ball in motion, mandating easier home purchases for low income families.
    Lenders complied.
    Allow the Trojan horse inside the castle walls and guess what will happen? Someone will open the gates of greed and without a good defense, the offense wins.
    In this case lenders took the offensive and created Adjustable Rate Mortgages, Liar Loans without documentation, 90 and 100 percent loans and a bag full of other fun tricks for virtually any breathing worker to become a homeowner.
    And Congress, yes both Democrats and Republicans stood back with their thumbs in their suspenders and admired what they had created.
    Until now!
    Speed forward just five years and we have the mortgage meltdown mess brought about by the very representatives we elected to look out for our welfare. Unfortunately, our elected officials are not Wharton School of Finance graduates.
    For the most part they don’t even understand basic economics.
    Lenders have known for decades that borrowers have to demonstrate credit worthiness. They need to have collateral. They need to have some of their own money at risk.
    When these safeguards were removed by Congress, what did they expect would happen?
    Growth of the sub-prime mortgage market ballooned. Facilities to package and sell these loans as Mortgage Backed Securities soared. Money was cheap, plentiful and being dealt out to lenders like a deck of cards.
    In this type of lending environment, greed is inevitable by every participant in the food chain.
    So, we have arrived at our current state, waiting for Congress who will once again pool their ignorance and some intelligence before slapping on the largest financial Band-Aid since the depression.
    Unfortunately we are all the benefactors of Congressional bills which start out with a slim and simple idea which ends up shaped like a Jenny Craig pretzel.
    The net result is a solution rather than resolution. Our financial system has the red flag waving over Capitol Hill and the white flag is about 10 days behind.
    Congress will ignore the wisdom of the true financial gurus and seek to make political hay as Rome burns.
    And, if the bail out passes, and it will, Congress will take credit for saving America without ever a footnote that they led us into this debacle.
Miles H.  Barber can be reached at Scweekly2004@yahoo.com