Before 2008, few, if any, paid attention to bank mergers or the slow but steady increase in unemployment. Everybody was intent on increasing home sales and home prices. Few economists were warning of potential adjustments to the market and they were branded as "nay-sayers" or alarmists. The real estate industry was booming; buyers with modest incomes and good credit scores were qualifying for home loans; investors were able to get loans to repair or upgrade houses, sometimes several at a time, based on the homes future equity (house prices could only go up or drop only 5-10%, right?). Builders were selling houses and condominiums when they were 80% complete and at times selling apartments prior to the floor being built. Home sellers were receiving a good return on their investment and some buyers were looking to future equity lines of the homes they bought with thoughts of a good return on their purchase.
Now early 2010 we have accepted new terms or conditions in our daily talking points that before were strange or unknown terms. Unemployment rates reported as two figures (12%; 10.1%; 9.2%), unemployment rate charts, benefit recipients & non- recipients, short sales, REO (real estate owned), Bank owned, BPO (broker price opinion), GDP (gross domestic product), TBTF (too big to fail), TARP, derivatives (visible & secret), shadow markets, hidden stocks, incentives, bank regulators, Federal Reserve, Wall Street lobbyists, $1 trillion national deficit, banksters, golden parachute, etc.
We have witnessed the Federal Reserve & U.S. Congress give over a trillion dollars to banks, insurance companies, carmakers and financial institutions either directly or indirectly through low interest (0.02%) loans originally designed to bolster financial markets to prevent failure & a total collapse of our financial markets bringing on a 1930's style market crash. The Federal Reserve and Congress told the public this was necessary to "shore up" Wall Street & to promote hiring and increase lending to individuals & small business owners. Lending standards were relaxed slightly but only the most solvent and credit worthy individuals & companies received the benefits from TARP & other incentives from the government; lending to small business still lower than it was in 2008 and fewer individuals can qualify for first time loan or refinance.
Today, our economy is slowly showing signs of recovery but it is far from over. Some sections of the country are recovering rapidly while other sections are still experiencing layoffs and high unemployment, rates are still over 9% nationally and over 10% locally. Banks are still maintaining a tight credit requirement for loans but stocks & derivatives are soaring back to 2008 levels, CEO's receiving high bonuses, banks & insurance companies stocks & profits rising rapidly. Small businesses and private real estate investors are still going bankrupt and closing as consumers continue to look for bargain basement prices or reduce spending ahead of fears about their employer going under & they loose job security.
Congress is currently debating financial reform. It is also conducting hearings to determine the cause of the recent financial meltdown and trying to determine which financial institutions took either advantage of or had foreknowledge of the possible difficulties and hedged stocks or derivatives against the meltdown. Congress in a "knee jerk" reaction to the meltdown, based on advice from financial experts, has spent over $1 trillion of taxpayer money either in direct loans, bailouts, or in extremely low interest loans. Amid the current US deficit, the Federal Reserve has earmarked $1 trillion to aid the European Union (EU) in its bailout of Greece & possibly Spain, Portugal and Ireland using the same excuse that it may affect the US stock market and cause an economic crash.
Now I am neither a financial wizard nor an expert in financial market notes. History has a habit of repeating itself and it is possible we will end up like Greece filing bankruptcy by spending more than we take in as revenue. With all the talk on Capital Hill about transparency and prevention of large financial institutions collapsing, the Federal Reserve is still allowed to hold secret board meetings on how it will invest taxpayer dollars with no Congressional oversight or audit. Financial institutions are now bigger than when the "meltdown" began and make up a large portion of the U.S. GDP; Federal Reserve has stated that if financial institutions fail again it would take steps to reduce the effects on the taxpayer.
IMHO would it not be better to take steps to prevent it from happening in the first place. To reduce the size of financial institutions so no one company can cause a collapse and have a truly transparent trade of financial documents; after all, why do real estate agents have to be transparent in their contracts to protect the consumer but Wall Street does not? This is just my opinion but something needs to be done to protect the real estate industry and the consumer from this situation in the future.
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