Pasadena Politics

Having worked at a Mortgage Bank for nine and a half years (IndyMac Bank – left October ‘07) and watching them being taken over after a bank run (helped by Schumer by the FDIC and reading/listening to the news of other major players in the field, I find my misgivings about the direction of the mortgage market over the course of the last 8 years fully justified. They started shortly after I married and began looking at homes.

I watched housing prices jump up faster than what seemed reasonable and faster than what I could afford to pay. The turn around on the homes (flipping) accelerated the increase in home prices so that the over-valuation was quite apparent – if you wanted to actually pay attention to that fact. The easy qualifying of borrowers and their unwise decision to use ARMs (especially 3/1, 5/1, and 7/1 ARMs) as the instrument to secure the mortgage when the rates would only go up screamed trouble. At least in my mind it did.

People who would not qualify under a Fixed 30 year loan certainly qualified for a 7/1 ARM or a NegAm but any consideration that they would be unable to afford the payments on the Mortgage once the fixed period ceased were waived aside with the fatefully foolish optimism that the housing prices would continue to rise. Obviously, they slowed, stalled, and began to return to Earth and more realistic values.
That, combined with the overall slow pace of personal wealth (never make Trade Agreements that favor those whose ideals and morals are not of equal or greater footing as they will always undermine your own countries ability to sustain it’s wealth*) equaled default. To be fair to IndyMac Bank: they did pull back and throttle down on making such loans, but even then, it was market driven as the market started adjusting – far too slowly and years too late – to reality.

So here we have the potential Bail Out of the investors who drove this market off the cliff, so to speak, or the markets crumble and China then owns us (kidding…kinda*). This is problematic because: A – it actually will hurt all Americans if the markets crumble (possible Depression) and B:Thoughtlessness with regards to applying the bail out will only encourage over-indulgence. No one should make any money off this Bail Out. Tax Payers (direct and indirect) should not feel they just gave a free pass to those who profited most. If it were not for the simple fact that Dollar is backed by confidence and not by any physical item, I would be completely against a bail out.

*Those are other topics which I will address in greater detail on a later date.