A question asked:

What I would like to know is how many mortgages are really from people that couldn’t pay for their home when interest rates rose and how many foreclosures were from investors that bought with interest only loans trying to flip properties after they appreciated and got caught in the economic cycle. You know it seems that programs that are set up for altruistic purposes are then taken advantage of by greedy people. Is this inevitable or can safeguards be built into the process? I just don’t believe that things are so black and white (no pun intended). How can an attitude of service and sacrifice be fostered in this country above the where’s my piece of the pie thought.

I don’t have a good simple answer to your question about fostering service and sacrifice upon a citizenry. I do believe allowing corporations carte blanche and then bailing them out when their excesses catch up and bite them in the butt is not the answer. I don’t believe the advertisement model of capitalism teaches folks to conserve and save for the future, in fact it hypes quite the opposite in the face of evidence that we do indeed live in a finite world. I do believe that the modern Evangelical movement preaching we Americans are wealthy because we deserve to be — and God says so — does not promote peace and harmony on a planet of diverse culture. But I do believe government can play a role in suggesting ethical behavior and promoting the common good.

Like you, I have little sympathy for those who saw a way to make a quick buck, based on a hugely optimistic market demand, which ignored the dangers of over supply. I have measured confidence in a capitalistic market where domestic policy promotes economic growth without passing costs unfairly to the public domain. I am talking government oversight and regulation of private sector players, as a matter of practical necessity.

Investigative reporting strongly suggests some real estate advisers and investment bankers persuaded homeowners to take advantage of these huge market run ups and to cash in while they had a chance. This behavior from “experts” is in violation of a common sense rule against risking a primary residence to speculation. I am suggesting, these loans fueled by wildly rising prices, often with inflated borrower claims of wage potential, would not have happened without the advice and consent of lenders. Home buyers fell prey to their own greed, and also to the greed of those they trusted for their leadership.
We can distill the argument one further step. Realtors encouraged and investment bankers underwrote bad loans because government oversight had been eased. The assumption that free markets will self-perform more efficiently without government intervention, was the guiding doctrine. This has been exactly the case. Unfortunately though predictably, the pendulum of an unrestricted market allows for spectacular highs and disastrous lows, when there is not a governor in place which we call regulation.

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