Tuesday, August 21, 2007

Eat the Rich

There was a great cartoon in The Columbian last week. Two guys are walking down Wall Street and one says to the other, "It turns out, poor people with bad credit can't afford to buy a home. Who knew?"

And that perfectly illustrates the Wall Street greed that led us to the current liquidity crisis. Last week the Federal Reserve acted (finally) on news that Countrywide might go bankrupt (among other issues) and cut the discount rate. This doesn't affect lending rates, what it does is give lending institutions who are having temporary cash flow problems an inexpensive way to borrow money until they're back on their feet. Sort of like using your equity line to pay for an emergency and then paying yourself back, instead of liquidating your 401K.

This has been met with mixed reactions. On one side people are wondering what took him so long. And on the other side, people are saying, listen those greedy rich jerks should be punished for the mess they made. Why are we always bailing out the rich people?

It's a good question, and no one wants to reward the billionaire investment bankers who have gotten rich(er) on the backs of innocent poor people. But it's not entirely accurate to say that's what the Federal Reserve has done. Were the banking industry to collapse, Angelo Mozilo, George Bush and the rest of the billionaires would still be out golfing next week. It's you and I who would be standing in line at the soup kitchen.

As it is, I've now been able to find a home for the loan applications of most of the people who, just last week, thought they might never close. And I'm really hoping I'll be able to help out some people who were, unfortunately, refinanced two years ago by an unscrupulous lender who put them in a terrible situation. If the new restrictions prevent me from doing so, their mortgage payment will almost double, and they'll probably end up in foreclosure, even though they have 50% equity and excellent credit (they have very little income and will not be able to make the increased payment). They're very scared and I want to help them, even if that helps Wall Street too.

Love might make the world go 'round, but it's the free-flowing exchange of money each day that puts food on our tables and roofs over our loved-ones' heads.

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