A former Senator, Phil Gramm, and a former trader and financial services executive, Rick Santelli, have in the past two days availed themselves of high profile media platforms to call out the myths attendant to the nation’s housing crisis and resulting $275 billion Obama “solution”. For their articulate forays, those who wish to continue living in the United States rather than the European Union’s westernmost outpost should be thankful.
The Wall Street Journal on Friday published part of a paper Gramm recently presented to the American Enterprise Institute in which he explains how deliberate politicizing of home mortgage lending by fervent Democrats created an untenable bubble. Within just 12 years (1994-2006), mortgages classified as subprime (replete with alluring teaser rates for entrapping unqualified first-time homeowners) rose from 4% of the lending landscape to 20%.
This, plus the sudden arrival and equally rapid exodus of real estate speculators, combined with massive jobs cuts across multiple industries, led to the current foreclosure fiasco. A lot of people were homeowners on a wing and a prayer.
Everyone in America should have the expectation of a roof over their heads. Obviously, some people do not, while others will experience roofs of expanding and contracting size and/or quality across their lifetimes. What set off Santelli, who echoed the opinion of untold tens of millions of conscientious, responsible Americans, was President Barack Hussein Obama’s politically motivated pledge this week to give those facing foreclosure a bailout to keep them in their homes.
In the age of YouTube, Santelli became an overnight sensation, but he is hardly a newcomer to the world of capitalism or television. Regular CNBC viewers have been watching Santelli’s reports from Chicago for a decade. Before he joined the cable network, he was a Chicago Merc order filler/trader who rose to become an executive with several reputable firms. Santelli has not participated in the dramatic shift to the left that has eroded NBC/CNBC/MSNBC during the past decade. He is an unapologetic capitalist and straight talker.
His message has been ripped apart by the radical liberal media and White House press chimp Robert Gibbs, which was not unexpected. He is an elitist swine, they say. No compassion, they howl. Yet, Santelli merely took up by several notches a conversation that has been going on in venues across America, from roadside diners to gated country clubs.
If 91-92% of American homeowners dutifully pay their mortgages every month, and, in fact, would never think of flirting with foreclosure no matter the sacrifice (a second job sought, a nest egg depleted, a retirement postponed), why should we further burden our already obscene national debt with an additional $275 billion hit? Why should we underwrite poor judgment, why should we rescue people who were either clearly gaming the system (speculators) or delusional (unqualified mortgagees) or, like that octuplet mom, moronic?
Bailouts will fail before they will bail. Most people with even partially developed brains know this. They say, “Let the system prevail.” Banks, automakers, home owners. Some must go down. Most will claw back, survive, and live to embrace once again the promise of America.
Let me present the best analogy I have been able to summon amid this crisis. It is my own. So if it falls short, I stand ready to endure the backlash. A detached home with a driveway is indeed a shining aspirational jewel. But just because a home can be owned does not mean every individual will succeed in becoming a homeowner. Think about it this way. Man can fly. We have airplanes that fly very safely and swiftly. They are a marvel.
I can fly from point A to point B much more quickly than I can drive. But if I choose to become my own pilot I must seriously accept the responsibility. I must endeavor to understand the nuances of my course of action, and I must recognize its complexities. When I am in flight training, I can’t allow my eyes to glaze over reading the section entitled, “Extreme Turbulence Above Rugged Terrain”. I can’t afford to assume that the plane and its manufacturers and Mother Nature will not hold me to account when I settle into the cockpit.
But what if I decide to cut a few corners? Like an unqualified borrower, what if I decide to ignore the “adjustable” dynamics of an ARM loan? What if I take the plane out for a spin on a crystal clear morning? I know how to take off and I know how to level off at a cruising altitude. The views from up here are incredible, I tell my self. I never want to go back to earth. Who wouldn’t want to be up here?
I am flying along just like any other pilot. I am the Wright Brothers. I am Charles Lindbergh. I am Amelia Erhart. I belong. Then, the storm clouds gather. The winds change. Temperatures fall.
The plane is pitching. Ice is forming on my wings. Wind sheer is compromising my glide path.
Why? Why didn’t I pay attention? Why didn’t I focus on the important stuff? Why wasn’t I ready, protected, from the perils I am confronting?
I am the pilot. I have chosen my fate. Who can save me? I will crash at any moment. I will return to earth with a thud. It was nice up here. But what was I thinking? I was not ready. I have only myself to blame.
When they come for me, I will not be intact. It will be too late to bail me out.
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