How’s that hope and change working out?

Unemployment is still high. I’m still unemployed. So, what will it take to get employment? I believe that the economy started to slow down as soon as the Democrats took control of Congress in 2007 because it quickly became apparent to investors that the 2003 tax cuts would not be made permanent. Economist John P. Cochran says it very well in his letter to the Wall Street Journal: jobs will grow when investment grows and investment will grow when investor confidence returns.
Unfortunately, as I have said before, the current administration isn’t really making any changes that will help our economy. The credit crisis was brought on by a number of factors, including 100% financing of mortgages and dishonest appraisals of real estate. This practice is being revived as can be seen in this credit union’s advertisement that 100% financing is back. Note that the advertisement indicates that “Seller concessions up to 4% allowed.” This relates to the second problem that I mentioned, dishonest appraisals. If you buy a house for $100,000 but you get a kickback from the seller of $4,000, you haven’t paid $100,000 for the house. You have paid $96,000. And, if the bank loaned you $100,000, you are already underwater in your mortgage. The bank thinks that it loaned you $100,000 on a house worth $100,000, but it is really only worth $96,000 because that’s what you really paid for it. And, if you default on your mortgage, what can the bank get for the property to cover the mortgage? Certainly, the bank won’t get more than $96,000 for the property. That’s what is called a ‘toxic asset.’ The current $8000 tax credit extended to first time buyers only exacerbates the problem.
I know that veterans have always been eligible for better deals in home loans. The first house I bought, in 1976 required only a 10% down payment because I was on active duty and eligible for VA benefits. But a realtor I know in Texas tells me that she has received many e-mails advertising 100% financing. A quick search of the web indicates that 100% financing is still advertised by the State of New Jersey Housing & Mortgage Finance Agency, Atlantic Mortgage in Florida, from Blake Investment Group in Chicago, the US Department of Agriculture, and Merrill Lynch (now owned by Bank of America, one of the bail-out recipients). You can buy land in the Tampa and other parts of Florida with 100% financing.
Easy money is part of what got us into this mess. Easy money is popular, so politicians support it. It’s much easier to demonize highly paid executives and blame them for the mess we’re in. Well, you can fire all of the bank presidents and replace them with laid off auto workers, and the problem won’t get any better. As long as the government encourages irresponsible lending, we are going to run the risk of additional financial melt-downs, more unemployment, and shattered retirement plans.
I hope we get some change.