From Farai

The Financial Crisis Is NOT New

Farai Chideya

I'm sitting in an airport right now, watching Senator Barack Obama talk to Wolf Blitzer on CNN. An older white woman; a young white man; and two men speaking Japanese sidle up to the flat-screen television to try to find out what the hell is going on.

By that I mean: Since the 9/11 attacks, I have never seen so many people of such a wide cross-section of society freak out at once. It's as if people just realized that the financial fairy godmother was not going to come rescue us from our credit card debt, or the larger issues plaguing the country (and the world).

Of course Senators Obama and John McCain had a tense meeting over the economic rescue package at the White House; and as of this moment, no one knows if the debate scheduled for tomorrow will actually come off. On CNN, Sen. Obama says, "Families were having trouble even before this Wall Street Crisis."

Well, that's for sure.

The economic crisis is like a freight train run amok ... but it's been coming for a long time.

Poor and working people heard this freight train coming. People saw their neighbors losing their homes for months now.

But Wall Street missed the sound.

Washington missed the sound.

The people in Lancaster, California; Detroit; Baltimore; and any number of small towns heard the warning whistle but were tied to the tracks.

This economic crisis has been reality for a long time. A lot of folks just hoped if they shut their eyes, the train would pass and everything would be okay.

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The source of the problem is that incomes were not increasing to keep up with the cost of living.
The average homeowner wannabe could not afford a home similar to what their parents, or grandparents had, because the prices were just getting out of control.
So, the banking industry decided to let people borrow more money than they normally could have afforded, by qualifying home buyers at a significantly reduced interest rate, to make up for the increase in actual prices.
Unfortunately, the lower interest rates only applied for the first few years, and the hopes were that the average worker would get promoted, or their salaries would increase enough to cover the higher payments, on average of 5 years down the line.
When that did not happen, the banks forclosed on those properties where the owners could not make the "new" payments.
Since the banks got themselves into this mess by authorizing loans for more than the consumer could afford, the banks should take the hit.
But, foreclosure is not the answer.
I believe that the original interest rate, the rate that the consumer was originally qualified for, should be used for the life of the loan, or at least be extended for another period of time.
The banks could not foreclose on the properties, so the homeowners would still have a place to live.
The bank would still make some money, although at the reduced rate.
As long as the loan is not in default at the lower rate, the bank still makes some money, the consumer still has a home, and the economy stabilizes, because there isn't a flood of foreclosed properties on the market.

Sent by Joe Fisher | 10:02 AM | 9-26-2008

Amen Farai!

Sent by Isobel O'Brien | 11:58 AM | 9-26-2008

Thank you! That's what I've been saying all week.

Sent by c.c | 1:50 PM | 9-26-2008

I agree but lets not forget that "the right, not priveledge of homeownership" was a Bush policy. Go back to his first few months in office and read his speeches if you don't beleive me. The GOP admin allowed this to happen bc the housing boom was their solution to the looming stock crisis that was going on in 2000.

That's right housing was the solution, not green technology or an innovative industry. This crisis is the realest form of trickle down economics I have ever seen. The tone was set at the top and business and the citizens fell in line with what their admin was encouraging them to do. Washington "ignored" the sound hoping the wreck would take place after Jan 20th.

Sent by Mel Mel | 3:18 PM | 9-26-2008

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