Deferred gratification and the economic meltdown

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Deferred gratification and the economic meltdown
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“The gratification of wealth is not found in mere possession or in lavish expenditure, but in its wise application.” - Miguel de Cervantes

ARE you sufficiently outraged about being stuck with the $700 billion whopper of a bail-out bill? Well, I am and I am guessing, millions of others are just as furious. But before I unload righteous indignation, like an arson investigator, I would like to know the point of origin of this conflagration.

In the not so distant future when history will be written accounting for the wholesale errors in public policy committed on a grand scale in the art and science of American governance that resulted in the economic meltdown that threatens the very foundations of this country, one act is the point of origin, enacted more than 16 years ago during the Carter era and then expanded during the Clinton years will be analyzed and its bitter lessons learned.

That act is called the “Community Reinvestment Act” or CRA, which in essence sought to provide home ownership to low-income groups across the country – all in the name of political correctness – the dire consequences of massive defaults on high risk loans be damned. Fannie Mae and Freddie Mac guaranteed loans extended to millions of individuals in the subprime market which resulted in a devastating tsunami wave of defaults causing the mortgage mess and now severely afflicts the economic well-being of the country and of the world.

How did these subprime loans morph into this mess? Chiefly by legislation which penalized banks and enforced by such community organizing groups such as the notorious ACORN, which hired lawyers to sue banks and force them to extend loans to less than acceptable loan applicants, the problem has been building up through the years and finally reached critical mass that just blew up in our faces. Surprisingly, the Bush administration has been sounding the alarms years ago and a bill to regulate and rein in Fannie Mae and Freddie Mac proposed by McCain was defeated by the Democrats about 3 years ago. The banks are no less culpable, seeing this piece of legislation as an excuse to indulge in widespread, opportunistic, greedy behavior. The result: an industry no less different than a house of straw built by the first pig. Only this house is worse, because the subprime mortgage mess is a quagmire that pulled all other structures with it into the pit.

For many in the middle class who grew up and believed in the sound principles of meritocracy, where, in an ideal world, you get what you worked for in the end – the title to your home free and clear, the idea of even taking a loan which one is grossly unqualified for seems unthinkable. Many in the middle class feel cheated. One can understand the outrage of millions at those individuals in power who played dice with our money and left us high and dry with paying down this bail-out bill.

The politicians, bankers, economists and all others responsible for these are lucky they live in this kinder, gentler age because less than two centuries ago, they would have been tried for treason, tarred and feathered, publicly flogged, boiled in oil, or locked up in jail instead of just being voted out of office.

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