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Hey, Wall Street Occupiers – there's enough blame to go around

I know a lot of people who are facing serious financial trials and tribulations that would make teeth grind in the most pacifistic Wall Street Occupier. And that would include my own current economic status. Times are tough and I’m hardly immune from that situation.

So, who should I blame for my fiscal plight? Folks in Wall Street are easy and, in some cases, deserving targets. I could easily argue that members of Congress, from both sides of the aisle, share sizable portions of blame. The last president didn’t do enough to keep us out of this fiscal mess and the current president seems to think we’ll get out of this hole by resolutely putting our backsides to digging deeper. I could even join with that more radical element of the Wall Street Occupiers, and Michael Moore, who believe that capitalism is the evil culprit with the lion’s share of guilt.

While portions of blame can appropriately be affixed to any of the targets above, there’s another group that is also culpable in this situation, and I’m a member of that group. I believe we all are.

As I see it, with benevolent motives, a desire to curry favor with the voters or, more likely, a mixture of both, members of Congress passed the 1992 Community Reinvestment Act (CRA) and charged Fannie Mae and Freddie Mac with fulfilling a mission of promoting government sponsored enterprises (GSEs) that fit with an “affordable housing mission.”

That and the dot.com revolution created a volatile economic mix. The economy burned brightly for most of a decade. After sputtering a little around the end of the millennium, it re-ignited, to some degree, and burned for several more years. But, a flame like that has a tendency to consume fuel on a rapid basis.

With an influx of thousands of additional buyers, we found ourselves with an explosive seller’s homebuyers market. If one buyer wasn’t willing to pay the asking price the next one surely would. Prices climbed precipitously.

Nudged on at first, bankers, realtors, mortgage brokers and others in the financial industries quickly recognized an opportunity to make some big bucks. They jumped in with both feet and were soon offering loans at 125-percent of the appraised value of the home. I had mortgage brokers, more than one that is, tell me, “You don’t have to worry about it. The value of homes will always go up.”

In the ‘90s, we did all the things our parents and grandparents warned us against: we borrowed like drunken sailors. Mortgage brokers didn’t even blink when they saw that monthly mortgage payments would run to 60 percent or more of the buyer’s monthly income – “Don’t worry, after a couple of increases to your wages that figure will drop.”

Then they encouraged people to wrap their credit card and other debts into the new mortgage. I did it myself. Why wouldn’t I?

I started with $1,300 in monthly payments and, after refinancing, I owed $920 and, this way, I was able to write my credit card debt off against my taxes. As I was hardly alone in this strategy, the net result is that a sizeable portion of individual debt was buried in home values, home values artificially inflated by providing mortgages to people whether they could afford to pay back the loans or not (do you remember the No-Doc Loans – no need to prove ability to repay).

Keep in mind, no one pointed a gun at my head and forced me to sign the new mortgage. I even recall sitting at the kitchen table and telling a friend, “This is crazy. Someday, we’re going to have to pay for this.” But, it would have been even crazier, or so it seemed, to turn down the opportunity to lower my monthly expenditures. Of course, I filled that gap, not as quickly as others, with new debt. It was a happy cycle of borrow and refinance, borrow and refinance.

I’m no financial wizard but I understood certain simple laws of economics that are as true as the laws of physics. I knew that what goes up tends to come down and the higher it goes the farther it has to fall.

The financial crisis we face today was brewing long before most of us noticed or cared to look. It came home for me with the chilling effect of an iceberg dropped on my head about 1997. I was listening to the radio and some economist was speaking about how, with Alan Greenspan at the helm, we’d finally figured out this whole economy thing and that, from now on, we won’t experience the economic downturns that have plagued society since the dawn of trade, barter and currency.

Like I said, I’m no economic guru but that scared the bajeebas out of me. Not only didn’t I believe it but, the mere fact that someone of supposed expertise in creating economic forecasts would utter such words was sobering in the extreme.

So, maybe most of the Occupiers on Wall Street are too young to really share the blame for our current situation. Still, most, if not all, enjoyed the benefits of a hyper-active economy for many years (where do you think that X-Box 360 and the big-screen television came from?).

The question is, what do we do now. If, in the face of this crisis, we choose to follow the radicals who want us to abandon the free market in favor of socialism, we’ll receive everything we deserve – perpetual economic malaise. Worse yet, we will have abandoned the principles of upward mobility, hope for a better life and personal liberties (yes, personal liberties – whoever holds the purse strings gets to name the tune we dance to).

It’s easy to panic when things get rough. Those, however, who keep their heads almost always finish on top. For many, having some kind of faith helps to carry them through it all in one piece.

I’ve seen the best the government can do. Socialism is putting all my faith in that basket. As for me, I’d rather reaffirm the principles of hard work and frugality than to depend on the government. And, I certainly won’t put my faith in someone who so readily points out a target to blame.

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