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Are Americans ready for the ramifications of the banking bust?

Submitted by on Monday, 29 September 2008 No Comment

I’m starting to get mad. Really, really mad. Borderline irate, even, with each news alert that lands in my inbox about the latest national financial disaster.

Today: Wachovia goes down, taking the Dow with it. We’re left with basically three big banks in the country, and I worry about mine. Remember, Bank of America’s taken on that whole Merrill Lynch-Countrywide mess.

The obvious solution is for me to cancel some news alert subscriptions. And maybe drink less coffee. But that wouldn’t solve much: This disaster is in my face, day in, day out.

We walk to school and see a crunchy yard — a cousin’s house was foreclosed on months ago. On the trip home, we notice six-inch weeds in a formerly immaculate lawn — a moving van was out front two weeks ago. The “for sale by auction” signs of the summer have largely disappeared, though. Guess no one’s buying here, even at the current “bargains.”

Maybe folks finally have figured out that if they wait a few months, today’s bargains will be tomorrow’s bad deals.

It’s a shame that realization didn’t hit about three years ago. Because the entire country is going to be paying the price for decades on end. It’ll start at $350 billion and end who knows where.

Why? Because we as a nation became addicted to easy credit. We wanted it, and we wanted it now. And we were going to have it, by God, because some Realtor or loan officer told us we could have it and we believed them.

Pawpaw would have been appalled. When he died in 1984, his 10-year-old Chrysler New Yorker looked as shiny as the day he drove it off the lot. He’d paid cash for it, and he knew how to take care of his stuff.

He also knew how to stretch a buck. If some folks can squeeze a penny until Lincoln yells, Pawpaw could put a choke hold on a dollar until Washington begged for breath.

He used to recycle coffee grounds for human consumption, not composting. No need to throw them out after one brewing. Add a little instant coffee and it’ll be just as flavorful as the first pot, he assured us. He was flat wrong about that — how a former Navy man could tolerate such weak coffee I’ll never know — but he was right about a lot.

And he would have been appalled at some of the things I’ve seen in recent years.

An acquaintance, for example, who’s had two bankruptcies but still bought a house on an interest-only adjustable-rate loan three years ago. With no down payment. And immediately went out and took out a second mortgage to renovate.

She’s now trying to figure out how to keep her house.

I don’t blame her entirely, though all consumers have the responsibility to educate themselves.

Her Realtor assured her it would work out — “everyone’s doing it.” The loan officer highlighted the low early payments, glossing over what would happen when it came time for the ARM to reset. The information was there in the very paperwork she signed, but she didn’t read it. Because everyone told her it would be fine.

It’s a classic example of how the greed-fed terrible trio created this mess. Realtors wanted huge commissions, banks wanted to write loans and buyers wanted more than they can afford because they were entitled.

And that’s why I’m mad. I didn’t play, but I’m going to have to pay. All of us will.

And I’m scared, too. I don’t know how this is all going to shake out, but I know it’ll be a lot shakier before it’s through.

AFTERNOON UPDATE:

I’m not mad anymore. Just stunned and confused after the House rejected the bailout bill. And had the nerve to blame Speaker Nancy Pelosi for making the issue too partisan.

Texas Republican John Culberson opposed it because he feared the bill would hand unbridled power over to Treasury Secretary Henry M. Paulson Jr., according to the New York Times. I can see that concern.

But another Texas Republicans — and it was Republicans responsible for the rejection — would put the nation on “the slippery slope to socialism.”

Yes, bailing out big business is always the hallmark of socialism.

I’m going to quit thinking about this. Good thing I’m drinking decaf now.

Copyright 2008 Debra Legg. All rights reserved.

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