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Health & Fitness

Our Federal Government Can't Learn From Past Mistakes

Even though the housing bubble burst, the Justice Department is in the process of forcing banks to make loans to people who can't pay them back.

As we are all aware, the American economy is in pretty lousy shape.  Sure, GDP is growing, but without any jobs. 

How did we get there? 

Much of our current problem was caused by banks loaning money for homes to people who could not afford them. 

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When the economy slipped, and all those creative financing ideas such as “adjustable rates” started adjusting up, the whole housing market collapsed, foreclosures, dried-up refinancing, equity wiped out, neighborhoods turning into mini-ghost towns, government bailing out banks, stimulus, spending, national debt crisis ... blah, blah, blah.

We can argue all day about whose fault it was.  There are mistakes that can be found all over the political spectrum.  But we can surely agree - the problem was born almost 30 years ago when bank rules were relaxed, and 20 years ago when government started encouraging banks to make loans to folks who normally would not qualify for the standard 20 percent down fixed-rate mortgage that has been the tradition for decades.  Sure, their heart was in the right place - they wanted to make the "American Dream" more readily available to more citizens.

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I won’t even bore anyone with the less-than-wise financial details about bundling mortgages into securities, and selling them like stocks, and how Fannie and Freddy are a big part of this mess, and we are still pumping billions into keeping those two companies afloat.

We can also agree on one basic idea.  Perhaps if banks were not in such a hurry to make fast profits, trying to use the housing price upturn/bubble of 98 to 06 to get filthy rich ... sure, fewer people would have owned homes, but fewer would have been foreclosed upon over the last few years as well, and we might be in much better economic shape as a country. 

One only has to look at Canada - they didn’t have all the exotic loans.  Their economy is in much better condition than ours right now.

So - why do I even bring this up?  Why am I rehashing recent history? 

Because our current government is trying to restart the problem all over again. 

An article ran on July 8th in Investor’s Business Daily: The Justice Department has asked banks to relax their lending standards to minorities, and approve loans for those with poor credit - as their punishment for alleged discrimination.

Funny, when I checked my recent credit report, I don’t remember it listing my racial background anywhere on that. 

These banks chose to settle out of court rather than face prosecution - and of course having to rack up huge attorney fees. 

These loans would be made available to those who have less than stellar credit, and even allow public assistance such as welfare payments, food stamps or unemployment to be used as “income.”

Say what you want about these banks.  Maybe they were discriminating.  Maybe they have bigots working in their loan-underwriting department.  Maybe some of these bankers dance around in white robes and burn crosses in their spare time.

If they were breaking the law, then the Justice Department should be prosecuting them.  People should go to jail, or at lease be fired.  There should be accountability.

But do we really think it is a good idea to give loans to people who might not be able to pay them back?  Isn’t that why credit ratings exist - so that loans are not given out willy-nilly to just anyone?  It protects the bank - and its shareholders, and these days, it also protects the taxpayers from having to bail out any more banks.

What is going on at the Justice Department?  What does A.G. Eric Holder know about this?  Why is Congress not getting involved in some sort of oversight?

Don’t look now, but if you think there were a lot of foreclosures in your neighborhood now - our federal government is trying to make sure more are coming in the near future. 

I for one am not holding my breath waiting for my home equity to make a comeback anytime soon.

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